An unsettling report on consumer incomes set off a spate of profit-taking on Wall Street Monday as investors worried that a tepid economy would erode companies' third-quarter earnings. Another drop in oil prices failed to shake the gloom from the market.
While investors were cheered by the Commerce Department's report of a strong rise in consumer spending for July, nearly flat growth in personal incomes and a handful of profit warnings for the third quarter made investors nervous. The news prompted them to cash in their gains following two weeks of advances.
"There's not a lot of resistance here, and you're seeing a little bit of profit taking," said Todd Leone, managing director of equity trading at SG Cowen Securities. "Trading lower is the path of least resistance."
Trading volume was again extremely light as many on Wall Street refused to make large moves until the Republican National Convention concluded without incident. Many investors also awaited the government's August employment report due Friday, hoping for signs that the economy was emerging from a sluggish summer.
The Dow Jones industrial average fell 72.49, or 0.7 percent, to 10,122.52. The Standard & Poor's 500-stock index declined 8.62, or 0.8 percent, to 1,099.15, and the Nasdaq composite index dropped 25.60, or 1.4 percent, to 1,836.49.
The Commerce Department said consumer spending rose 0.8 percent in July, better than the 0.7 percent growth economists had expected and far better than the 0.2 percent drop in June. But despite the increase in spending, Americans' incomes rose by only 0.1 percent in July, far less than the 0.5 percent forecast by economists and down from a 0.2 percent rise in June.
Rising consumer prices have been exacerbated this summer by high energy costs, but the trend appears to be changing, at least in the short term. Oil prices fell sharply Monday even as Iraqi officials said the country's oil output would be halted for a week because of insurgent attacks on the country's pipelines.
The first of what could be many corporate earnings warnings were issued Monday. Tyson Foods dropped $1.47, to $16.26, after the meat producer reduced its 2004 earnings outlook.
Accredo Health, a specialty pharmacy management company, met its fourth-quarter earnings targets, but said its 2005 growth would be less than Wall Street expected. Accredo fell $5.75, or 20.7 percent, to $22.05.
Oracle slipped 18 cents, to $10.11, after Wells Fargo cut its 2005 earnings forecasts for the business software maker.
* The New York Stock Exchange composite index fell 40.98, to 6414.54; the American Stock Exchange index fell 5.17, to 1224.33; and the Russell 2000 index of smaller-company stocks fell 7.11, to 544.56.
* Declining issues outnumbered advancing ones by 14 to 9 on the NYSE, where trading volume rose to 847 million shares, from 844 million on Friday. On the Nasdaq Stock Market, decliners outnumbered advancers by 15 to 7 and volume totaled 995 million, down from 1.01 billion.
* The price of the Treasury's 10-year note rose $4.06 per $1,000 invested, and its yield fell to 4.18 percent, from 4.23 percent on Friday.
* The dollar rose against the Japanese yen and fell against the euro. In late New York trading, a dollar bought 109.93 yen, up from 109.63 late Friday, and a euro bought $1.2058, up from $1.2016.
* Light, sweet crude oil for October delivery settled at $42.28, down 90 cents, on the New York Mercantile Exchange.
* Gold for current delivery rose to $407.80 a troy ounce, from $403.30 on Friday, on the New York Mercantile Exchange's Commodity Exchange.