Stocks finished mixed Monday, with all three major indexes posting slight declines, as the drag of a third earnings miss from a major U.S. corporation was offset by a better-than-expected government report on retail sales.
The Dow Jones Industrial Average shed 0.2 percent, while the S&P 500 index lost 0.3 percent and the Nasdaq fell 0.6 percent.
"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 in Pittsburgh. "Retail sales offered some good news -- that was big. If that didn't come in big, the market would be down a lot more," he said.
And, it certainly didn't help when analysts polled by Reuters again lowered their projections for S&P 500 earnings -- to a decline of 13.8 percent from the prior 11.8 percent -- and Goldman Sachs analysts put out a note saying this earnings season looks "awful" and more disappointments are on the way.
Offering a bright spot, 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.
The unexpected jump in gasoline sales pushed crude oil to a record close near $112 a barrel and made energy stocks the day's biggest advancers.
The S&P 500 energy-sector index rose 1.7 percent. Devon Energy and Transocean were among the sector's notable gainers. Dow component ExxonMobil was the blue-chip index's top gainer.
Financial stocks skidded, with the S&P financial index closing down 2.5 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 shares fell 8.1 percent.
"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.
Larger financials declined, but not as much as their smaller counterparts, marking their fifth down day ahead of earnings from the sector. Several big names are slated to report this week, including JPMorgan, Merrill Lynch and Citigroup .
(Click here for a full earnings calendar.)
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, rounding out the top four gainers in the Dow Jones Industrial Average were Coca-Cola , Caterpillar and IBM , all of which report earnings later this week.
Coca-Cola is a staple that consumers buy no matter what the economic climate, Baum offered. And IBM already said it plans to hit its number. Plus, Baum pointed out, all three are multinationals with good dividends.
The most important takeaway for investors, Baum said, is that the S&P is trading at 13-times earnings. "That's cheap!" he said. "Markets do good when it's at 18 or 19. Once people understand that, they'll realize that now it's time to buy."
Gearing Up for Tech Earnings
Investors are also watching for tech earnings this week, with reports due from Intel and Google , among others.
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.
However, it's worth noting that "tech," which we tend to lump together, is comprised of many different industries -- from chips that go in computers to IT services -- and varying levels of exposure to financial services, overseas markets and other factors, so it's best to take tech earnings on a company-by-company basis. (Click here for a Tech Check primer on companies reporting in the coming days.)
Even companies that manufacture 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."
Airlines advanced, with the S&P airline index up 0.6 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 27 percent 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.
In other deal news, Manitowoc , a Wisconsin 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.
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
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