Stocks dip on bad news from 2 firms
NEW YORK - Wall Street began a holiday-shortened week with a moderate pullback yesterday as investors recoiled at bleak news from Toyota Motor Corp. and drugstore operator Walgreen Co.
NEW YORK - Wall Street began a holiday-shortened week with a moderate pullback yesterday as investors recoiled at bleak news from Toyota Motor Corp. and drugstore operator Walgreen Co.
The two companies - both viewed as better-positioned than many of their peers - provided more evidence that even stronger businesses are struggling as consumers cut back their spending.
Walgreen's profit fell 10 percent in its fiscal first quarter, mostly because of the costs of opening more than 200 stores, so the company said it would slow its expansion. Toyota, meanwhile, slashed its earnings forecast for a second time, warning that it expected to post an operating loss for the fiscal year through March. It would be the Japanese automaker's first such loss since it began reporting results in 1941, underscoring the challenges facing car companies.
Toyota's U.S. rivals, General Motors Corp. and Chrysler L.L.C., received a $17.4 billion lifeline from the federal government Friday to stave off bankruptcy.
Yesterday's gloomy corporate news highlighted how weak the consumer is, said Kim Caughey, an equity research analyst at Fort Pitt Capital Group Inc. That is a troubling prospect, she said, because it appears the U.S. economy cannot rely on consumer spending to reverse its downturn.
Today, the Commerce Department is to report on last month's new-home sales, while the National Association of Realtors is to report on older-home sales. Economists forecast that both reports will show declines.
Tax-loss selling - when investors sell securities at a loss to offset a capital gains tax liability - also may contribute to the market's weakness until the year's end, Fort Pitt's Caughey said.
The Dow Jones industrial average fell 59.34, or 0.69 percent, to 8,519.77. The Standard & Poor's 500 index fell 16.25, or 1.83 percent, to 871.63, and the Nasdaq composite index fell 31.97, or 2.04 percent, to 1,532.35.
The Russell 2000 index of smaller companies fell 11.19, or 2.30 percent, to 475.07. Smaller companies tend to be more vulnerable to economic weakness than larger companies.
Toyota's U.S.-traded shares fell $3.50, or 5.44 percent, to $60.88.
Walgreen shares fell $1.10, or 4.22 percent, to $24.98.
Also weighing on stocks was Caterpillar Inc., which said it would cut executive compensation in 2009 because of waning demand for mining and construction equipment. Caterpillar shares fell 91 cents, or 2.13 percent, to $41.78.
Wall Street has shown some signs of relative stability in the last few weeks. Since reaching multiyear lows on Nov. 20, the Dow is up 12.8 percent and the S&P 500 is up 15.8 percent.
Besides relief over the auto bailout, investor sentiment also has grown a bit more upbeat after the Federal Reserve last week cut the benchmark federal funds rate to a range of zero to 0.25 percent in an effort to boost borrowing and lending.
Although the federal government has doled out hundreds of billions of dollars in aid this year to prop up the troubled auto and financial sectors, companies are continuing to seek assistance. Some of the country's largest property developers are seeking government help as the threat of default on commercial properties is growing, according to a Wall Street Journal report yesterday.