Stocks declined Monday as steep slides in commodity prices hit energy and materials, while a weak Empire State manufacturing report put a damper on investor sentiment.
The Dow Jones Industrial Average pared its loss, after being down as much as 100 points earlier. The S&P 500 and Nasdaq were also lower. The CBOE volatility index, widely considered the best gauge of fear in the market, was around 32.
Consumer staples were the day's best performers, with Kraft , Proctor & Gamble and Wal-Mart leading the Dow.
Energy, financials and materials were the weakest sectors. Alcoa , Caterpillar and JPMorgan were Dow's the biggest decliners.
This comes after a rocky week last week, in which the Dow lost 1.5 percent on Friday but ultimately finished up 2.3 percent for the week.
In the day's economic news: The New York Fed reported its gauge of regional manufacturing activity fell to 19.11in May from 31.86 in April. The level still indicates growth but was much weaker than the 30 expected.
The NY Fed report, along with the Philly Fed report, due out on Thursday, are watched closely as a precursor to the national report on manufacturing from the Institute for Supply Management.
Meanwhile, U.S. home-builder sentiment hit a 2 1/2-year high in May, boosted by the homebuyer tax credits and strengthening economy, according to the National Association of Home Builders.
Home Depot was a drag on the Dow after rival Lowe's beat earnings expectations for the quarter but disappointed with it its outlook, saying 2010 will be "a year of transition."
Lowe's was just the latest in a string of companies that beat their earnings targets but issued disappointing outlooks.
Last week, Cisco CEO John Chambers rattled the market. The networking-gear maker beat on both earnings and revenue but Chambers said there is still reason for caution given the weak job market.
Priceline, JC Penney, Kohl's and Nordstrom also delivered weak outlooks last week.
The recent events such as worries over the euro-zone debt crisis, falling oil prices and unsatisfactory economic data lend credence to many economists who have been predicting a weaker market and economy in the second half of the year.
However, some experts still say the economy will see some bright spots — including on the jobs front.
“Employment is still improving,” said Jack Ablin, CIO of Harris Private Bank. “The employment picture is going to brighten over the next 3 to 4 months.”
Ablin said he favors the cyclical sectors such as financials, consumer discretionary and industrials.
Oilfell back below $70 a barrelto its lowest in over three months.
Shares of oil giants such as ExxonMobil , Chevron and ConocoPhillips fell.
Goldheld steadyaround $1,233 an ounce after last week surging above $1,245. One mining executive said the precious metal is headed to $2,000 by year end.
The dollar see-sawed against the euro after earlier hitting a four-year highagainst the European common currency amid worries about the debt crisis.
Shares of Visa , American Express and Capital One fell despite news that credit-card delinquencies fell for the fourth straight monthin April, a sign that fewer borrowers will default on their card debts in the coming months.
The Senate is likely to hold a final voteon the financial-reform bill on either Wednesday or Thursday this week, according to a Senate Democratic aide. Senate Majority Leader Harry Reid is likely to begin the process of wrapping up debate on the bill later today.
Shares of large financials such as Citigroup , Bank of America and Goldman Sachs slipped more than 2 percent.
Big M&A day: Private equity firm is in talks to buy Pactiv, which makes Hefty bags, the Wall Street Journal reported. Pactiv shares surged more than 20 percent.
Hospital operator Universal Health Services agreed to buy mental-health-facility operator Psychiatric Solutions for about $2 billion in cash. Astellas Pharma, Japan's No.2 drugmaker, agreed to buy U.S. biotech OSI Pharmaceuticals , which makes the cancer drug Tarceva,
Apple got a boost after a report showed Asian bankers prefer the iPhoneto Research In Motion's BlackBerry for business.
American Superconductor shares rose after the electrical systems maker said it received a $445 million multi-year contractfrom China’s Sinovel Wind, the world’s third largest wind turbine maker.
BP got a boost after its latest recovery effort, siphoning oil out of the hole using a mile-long tube, seemed to work.
General Motorsreported a profit for the first quarter and the government is apparently looking for a Wall Street bank to serve as an adviser for a GM IPO, the Wall Street Journal reported.
Wal-Mart , Home Depot and Hewlett-Packard are scheduled to report earnings on Tuesday.
TUESDAY: JPMorgan & Massey Energy shareholders meeting; Fed’s Pianalto speaks; housing starts; PPI, earnings from Home Depot, Wal-Mart & Hewlett-Packard
WEDNESDAY: FOMC minutes; Google developers’ conference; weekly mortgage apps; CPI; weekly crude inventories; earnings from Deere, Target, Applied Materials
THURSDAY: Toyota/NHTSA hearing; BOJ monetary policy meeting; weekly jobless claims; leading indicators; Philadelphia Fed survey; earnings from Computer Sciences, Gamestop, Staples, Dell, Gap
FRIDAY: Earnings from Ann Taylor
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