NEW YORK -- After pushing stocks to record highs last week, investors turned cautious Monday ahead of a batch of corporate earnings reports.
The Dow Jones industrial average ended almost 50 points lower after closing above 17,000 for the first time last week. Investors moved money into stocks traditionally thought of as safer than the broader market: utilities, telecommunication companies and consumer staples such as soft drinks and detergent.
Stocks that depend the most on a growing economy were among the biggest decliners, including small companies, consumer discretionary names, materials and industrial stocks.
"All eyes have turned to earnings," said Joe Tanious, global market strategist with J.P. Morgan Funds.
The Dow Jones industrial average lost 44.05 points, or 0.3 percent, to 17,024.21. The Standard & Poor's 500 index lost 7.79 points, or 0.4 percent, to 1,977.65, and the Nasdaq composite fell 34.40 points, or 0.8 percent, to 4,451.53.
There's a lot riding on this quarter's earnings season. Most investors believe the weather had an unusual effect on the U.S. economy in the first three months of the year and that economic activity rebounded in the second three months of this year. Many companies blamed the weather for their disappointing first-quarter results.
Secondly, stocks are trading at all-time highs and investors will need corporate America to deliver on profits to justify these record-high prices.
"As we've emphasized in recent weeks, stocks are not cheap, but we believe they can climb modestly higher in the second half [of the year] amid continued economic improvement," said Russ Koesterich, global chief investment strategist at BlackRock, in a note to investors.
The Dow reached a record and a new 1,000-point milestone Thursday by closing above 17,000 for the first time. That followed a strong U.S. jobs report. U.S. markets were closed Friday for the Independence Day holiday.
The Russell 2000 index, which is made up primarily of small-company stocks, fell more than the rest of the market. The index lost 1.7 percent, versus the 0.4 percent decline in the S&P 500, which is made up of large companies.
Another sign that investors were hesitant to place big bets ahead of corporate earnings reports could be seen in Monday's low trading volume. Roughly 2.6 billion shares traded hands on the New York Stock Exchange, well below the 3.2 billion shares that moves on an average trading day.
Aluminum mining giant Alcoa reports its latest results today and Wells Fargo, the No. 1 U.S. mortgage lender, reports Friday. Investors are expecting second-quarter profits to be up 4.9 percent from a year ago, according to FactSet.
Major airlines stocks fell after the Transportation Security Administration announced new security measures that would affect international flights into the United States. The agency said that all electronic devices would need to have power to travel, including tablet computers and cellphones.
United Continental fell $1.26, or 3 percent, to $38.62; Delta fell $1.70, or 4.5 percent, to $36.90; and American Airlines fell $1.52, or 4 percent, to $40.10. Domestic U.S. airlines fell as well, but the declines were tamer. JetBlue fell 27 cents, or 2.5 percent, to $10.62, and Southwest fell 54 cents, or 2 percent, to $27.17.
Investors also tried to reduce their exposure to risk by buying U.S. government bonds. The yield on the U.S. 10-year note fell to 2.62 percent from 2.64 percent late Thursday.
Business on 07/08/2014