Stocks were mixed Monday as the drag of a third earnings miss from a major U.S. corporation was offset buy a better-than-expected government report on retail sales.
"Three major companies -- General Electric, Alcoa and Wachovia -- reported earnings so far this season ... and all three missed consensus estimates," said Nadav Baum, manging director of investments at BPU Investment Group.
Energy stocks were the day's biggest advancers, with the S&P 500 energy index up 2 percent as crude oil climbed above $111 a barrel.
Devon Energy and Transocean were among the sector's notable gainers. Dow component ExxonMobil was one of the blue-chip index's top gainers.
Retail sales climbed 0.2 percentlast month due to a jump in gasoline sales, the Commerce Department reported; economists had expected the gauge to be unchanged from February. Excluding gasoline sales, retail sales were flat. A separate report showed business inventories rose 0.6 percentto a seasonally adjusted $1.47 trillion in February.
Financial stocks skidded, with the S&P financial index off 1.8 percent after Wachovia reported a net loss of 20 cents a share as credit problems soared. Excluding items, Wachovia's loss was 14 cents a share; analysts polled by Thomson Financial had expected a profit of 40 cents a share. Wachovia also said it would make additional job cuts, slice its dividend and raise $7 billion in capital.
"Wachovia is a pretty vanilla bank and yet they had too much exposure," Baum said. "That's the concern on all the banks right now -- which is the next one to cut its dividend?"
Bank of America skidded amid speculation that it might be next.
Options activity was heavy in several other regional banks, including southern bank chains Colonial Bancgroup and Synovus Financial and Zions Bancorp , which operates banks in the west, Interactive Brokers reported.
Investors are bracing for more write-downs and dismal earnings from financials, with several big names in the financial sector reporting this week, including JPMorgan, Merrill Lynch and Citigroup .
"We're in the midst of this earnings season, so there is some nervousness about the outlook," Steve Goldman, market strategist at Weeden & Co in Greenwich, Conn., told Reuters. "And you still have the financial drag. There's Wachovia, which is down 10 percent, and the group still is not showing signs of stabilizing. But oil is helping."
Stocks had fallen sharply on Friday after Dow component General Electric reported its first earnings miss in 10 years, raising concerns that many executives don't know what's on their books and that there could be more surprises to come.
Still, the top four gainers in the Dow Jones Industrial Average were Coca-Cola , Caterpillar , United Technologiesand IBM , all of which report earnings later this week.
Several big names in tech also report this week, including Inteland Google . Analysts expect tech -- along with energy -- to turn in some of the best earnings this season but Michael Thompson, managing director of global research at Thomson Financial, told CNBC that investors need to be careful with tech as companies cut back on capital spending. He noted that tech earnings are now projected to have grown 7 percent during the quarter, half of the 14-percent estimate issued at the beginning of the quarter.
Even companies in consumer staples, seen as a good bet during an economic slump, are projected to show negative earnings growth, Thompson said.
"We're not at the bottom," Thompson said. "We expect this to continue for some time -- and it's not going to be an '08 fix," he said. Thompson said he'd even be cautious about the first half of '09. The intriguing part, Thompson said, is that "financials, we think ... are probably going to be the first guys that bounce back ... they've fallen the hardest."
As for the overall earnings seasons, Goldman Sachs analysts put out a note saying it looks "awful" and that they expect more disappointment in the coming weeks.
Analysts once again lowered their projection for Standard & Poor's 500 companies earnings to a 13.8 percent decline from the prior estimate of an 11.8 percent drop, according to Reuters estimates. (Click here for a full earnings calendar.)
Airlines advanced, with the S&P airline index up 0.4 percent, following news that Delta and Northwest are close to a merger agreementand could announce it as early as Tuesday, though pilot-contract issues remained unresolved, people familiar with the talks said on Sunday.
American Airlines, owned by AMR , is back up and running on a full scheduleafter receiving clearance from federal-aviation officials on Saturday to return all of its 300 grounded jets back to the skies. All in all, American canceled nearly 3,300 flights last week.
Shares of Circuit City surged after movie-rental chain Blockbuster said it hasoffered to buy Circuit City for $6 to $8 a share, or up to $1.3 billion. The bid for the electronics retailer represents up to a 105-percent premium Circuit City stock.
Manitowoc , a maker of cranes and restaurant equipment, has agreed to acquire British food-equipment maker Enodis for around 948 million pounds ($1.9 billion), the company said.
This Week:
TUESDAY: J&J, Intel, WaMu earnings; Empire State manufacturing; PPI
WEDNESDAY: BlackRock, Coke, JPMorgan, Wells Fargo, eBay, IBM earnings; mortgage applications; housing starts; CPI; industrial production; crude inventories; Beige Book; Fed's Yellen, Plosser speak
THURSDAY: Merrill Lynch, Nokia, Pfizer, Capital One, Google earnings; jobless claims; Philly Fed report; leading indicators; Fed's Kohn, Fisher speak
FRIDAY: Caterpillar, Citigroup, Honeywell, Xerox earnings; Fed's Lacker, Rosengren speak
Send comments to cindy.perman@nbcuni.com.