Stocks Weaken, Led by Health Care; Cisco Rises
Stocks declined as investors continued to consider future troubles in the euro zone and comments over the weekend by Federal Reserve Chairman Ben Bernanke indicating the central bank was willing to pump even more money into the economy.
The Dow Jones Industrial Average fell less than 10 points after posting a significant rise last week despite a weaker-than-expected nonfarm payrolls report on Friday.
Bank of America , DuPont and Microsoft fell, while Cisco and Pfizer rose.
The S&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Among key S&P 500 sectors, industrials, health care, and financials fell, while telecom rose.
The dollar rose against a basket of currenciesas the euro fell. Gold continued to gainMonday on prospects of continued Fed easing and euro zone worries, as did silver, which was trading at a 30-year high.
"Bernanke’s comments basically highlighted what people already know — that mainly it will take some time for the unemployment rate to come down to more favorable levels," Michael Sheldon, chief market strategist at RDM Financial Group, told CNBC.com.
"The markets are taking a bit of a breather here after a pretty strong gain of 3 percent last week, also following on the heels of a disappointing jobs report on Friday," Sheldon added.
One reason stocks haven't plunged, especially considered Friday's weak jobs report, is a more general sense of optimism among investors. Sheldon noted 49.7 percent of individual investors surveyed by the American Association of Individual Investorswere bullish on stocks last week, up from a reading of 20.7 percent in August.
The next catalyst for the market will likely be a decision on whether to extend the Bush-era tax cuts,as Congress is now considering. Democrats failed to get tax measures passed in the Senate over the weekend for all but families making $250,000 or more.
If the tax rates are extended, that "could provide consumers and businesses a higher level of confidence as we head into the new year," Sheldon said.
Shares of Bank of America slipped after the Wall Street bank told U.S. regulators it has sold enough assetsto meet the conditions set down in its $45 billion government bailout. BofA was given until the end of the year to generate the funds.
And the world's largest drugmaker, Pfizer , will welcome its new CEO Ian Read who will replace the outgoing Jeffrey Kindler, who retired unexpectedly, saying he needed to "recharge his batteries."
And Kellogg announced CEO David Mackay will retireeffective Jan. 1, and will be replaced by John Bryant, currently chief operating officer.
Kraft fell after news the food products company was taking its battle with Starbucks to federal court.Kraft wants to stop Starbucks from ending their agreement allowing Kraft to sell Starbucks packaged coffee.
Wal-Mart fell slightly after the U.S. Supreme Court said it would decide whether the largest sex-discrimination class-action lawsuitin U.S. history against the discount retailer's stores can proceed. The case centers on 1.5 million current and former female workers who seek billions of dollars in damages. The court said the charges from million of women were too diverse to proceed as a single class-action lawsuit.
In the technology sector, AOL could be on the brink of a series of transactions to breakup the Internet content provider, whichcould culminate in a mergerwith Yahoo , Reuters reported, citing sources.
Sprint Nextel shares spiked after David Einhorn, president of Greenlight Capital, a hedge fund, said he had taken a long position in the stock. Einhorn also said Greenlight has a long position in Vodafone .
Cisco rose after Oppenheimer raised the networking giant to "outperform" from "perform," saying losses in the company's switching business were already factored into the share price.
Goldman also upgraded Cognizant Technologies to "buy" from "neutral," and raised its price target for the information technology consulting and technology firm to $80 from $71. The brokerage cited a boost in IT spending by financial services companies and growth in offshore sales.
Groupon, meanwhile, spurned Google's offer to buy the online, local coupon site, preferring to stay independent. Google was reportedly willing to pay up to $6 billion for Groupon, which has 35 million subscribers.
Google, meanwhile, began an online bookstore operation on Monday as the search-engine giant looks to expand into e-commerce and compete against Amazon.com, among others. Google eBooks, as the bookstore is called, has 3 million titles that consumers can store in a personal online library managed by Google and then read on any device.
Dollar General's shares slumped after the low-cost retailer posted a drop in quarterly same-store sales growth Monday, although its third-quarter profit results were better-than-expected and the company reported strong full-year guidance. Dollar General's have climbed nearly 20 percent since early November as shoppers turned to discount retailers.
In health care, AstraZeneca's new heart medicine Brilique — or Brilinta — won final clearance from regulators in the European Union. The medicine will compete against Plavix, the world's second biggest-selling drug, as early as next year.
Celgene shares dropped after news the pharmaceutical company's myeloma drug, Revlimid, may cause secondary malignancies.
Abercrombie & Fitch rose after Goldman Sachs raised the teen retailer to "conviction buy," from "buy." Shares of the retailer hit a 52-week high earlier in the session. Aeropostale , however, fell after Goldman cut the stock to "sell" from neutral."
Shares of Massey Energy jumped after the coal company announced Don Blankenship, chairman and CEO, would retire at the end of the year. Baxter F. Phillips Jr., now Massey's president, will become CEO, and Admiral Bobby Inman, lead independent director on the board, will become chairman. Meanwhile, S&P Equity raised the coal company's target price to $57 a share from $49 a share.
Elsewhere in M&A news, 3M plans to buy Winterthur Technologies AGof Switzerland for about $448 million, to give the diversified technology company a bigger presence in industrial grinding and finishing solutions.
And Bill Ackman, an activist hedge fund manager, reported his firm Pershing Square Capital Management raised his stake in Borders to 37.3 percentfrom 31.5 percent, and said he was prepared to help Bordersacquire rival Barnes & Noble for about $960 million. Shares of both bookstore companies soared.
In U.S. economic news, the employment trend index rose in November for the second month in a row, to 99.0, up from a revised 97.6 in October, according to the Conference Board. The index is up 9.3 percent from a year ago, the Conference Board said.
“The disappointing employment numbers released last Friday are at odds with most of the leading indicators included in the Employment Trends Index," Gad Levanon, associate director, of macroeconomic research. "While we are not expecting economic activity or employment to grow rapidly anytime soon, we do expect employment to continue to moderately increase, following the trend of recent months.”
No other major U.S. economic news was expected to be released Monday.
During an interview with “60 Minutes” on Sunday, Bernanke said the Fed could engage in another round of bond buying, a program known as quantitative easing,if the jobs picture doesn't improve. But he also said it could be four to five years before the U.S. returns to unemployment of between 5 and 6 percent from the current 9.8 percent.
The signals from Bernanke would usually have boosted sentiment, but that isn't happening, Andrew Sykes, equity trader at Spreadex, told CNBC.com.
"There doesn't seem to be a huge amount of volume; (investors) are probably waiting for leadership when U.S. gets in," Sykes said.
Concerns over the euro zone debt crisis also continued to drag on sentiment. European shares ended higher thanks to strong crude oil prices, which lifted energy stocks. That offset concerns over the outcome of a euro zone meeting which was expected to outline further plans to contain the debt crisis. Euro zone ministers came under pressure to boost the size of a 750 billion euro ($1,006 billion) bailout fund intended to be used to prevent contagion of the debt crisis.
Moody's Investors Service, meanwhile,downgraded Hungary's soverign debt
to near junk level, citing increased concerns with Hungary's fiscal sustainability and high levels of external debt.
Asian stocks ended mixed with the Nikkei 225 and Hang Seng seeing slight declines.
On Tap Next Week:
MONDAY: Richmond Federal Reserve President Lacker speaks, UN Climate Conference, MetLife shareholder meeting.
TUESDAY: Bank of Canada announcement, IBD/TIPP economic optimism index, three-year Treasury note auction, consumer credit, API weekly report, Ireland budget announcement, 3M investor meeting; before-the-bell earnings from AutoZone, BMO Financial and Vail Resorts; after-the-bell earnings from H&R Block and Novellus.
WEDNESDAY: McDonald's November sales, MBA mortgage applications, quarterly services survey, 10-year Treasury note auction; before-the-bell earnings from United Natural Foods.
THURSDAY: BOE announcement, jobless claims, wholesale inventories, 30-year Treasury bond auction, DuPont investor day; before-the-bell earnings from Costco and Lululemon Athletica; after-the-bell earnings from National Semi.
FRIDAY: International trade, import and export prices, consumer sentiment, and Treasury budget.
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