Stocks take a pause after major rally
Stocks closed almost flat Tuesday, as the day’s early declines threatened to halt the market’s January rally one day after the Dow Jones industrial average closed above 11,000 for the first time since June 2001.
Disappointing earnings from Alcoa Inc., the first of the 30 Dow industrials to report, disturbed investors. The Dow fell more than 44 points in opening trading, but rebounded in the afternoon to close nearly even. The Nasdaq composite rose slightly after Apple Computer Inc. hit a 52-week high.
The mixed day came after a surge in buying during the first five trading days of 2006 that sent all the major indexes to at least four-and-a-half year highs. The rally took off after the Federal Reserve signaled the central bank was near the end of its streak of short-term interest rate hikes.
“This has been one of the strongest starts of the year we’ve had in many years,” said Linda Duessel, market strategist at Federated Investors in Pittsburgh. “You shouldn’t expect it to keep on going.”
With the market priced as it is, she said, “we’re more beholden to earnings and earnings outlooks. We could set ourselves up for disappointment if earnings don’t come in in a positive way.”
The Dow Jones industrial average fell 0.32, or nearly zero percent, to 11,011.58. The average of 30 blue-chip stocks gained 52.59 Monday to close at 11,011.90.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index fell 0.46, or 0.04 percent, to 1,289.69, and the Nasdaq composite index rose 1.63, or 0.07 percent, to 2,320.32.
Bonds fell, with the yield on the 10-year Treasury note rising to 4.43 percent from 4.38 percent late Monday. The U.S. dollar was little changed other major currencies. Gold prices fell after briefly reaching their highest level in 25 years.
Crude oil futures fell after rising on concerns that Iran was restarting its nuclear program and would further destabilize the Middle East. A barrel of light crude settled at $63.37, down 13 cents, on the New York Mercantile Exchange.
Tuesday’s only meaningful economic data was the Commerce Department’s November wholesale inventory report, which, excluding petroleum products, was nearly flat.
The Russell 2000 index of smaller companies rose 4.75, or 0.67 percent, to 710.99, its second record high in a row. The Russell rose 6.85 on Monday, closing at 706.24, the first time the index pierced the 700 level.
Advancing issues outnumbered decliners by roughly 9 to 7 on the New York Stock Exchange, where preliminary consolidated volume was 2.43 billion shares, up from 2.33 billion Monday.
Overseas, Japan’s Nikkei stock average fell 1.85 percent. Britain’s FTSE 100 fell 0.75 percent, Germany’s DAX index lost 0.77 percent, and France’s CAC-40 dropped 0.27 percent.