The stock market gave up ground today as interest rates rose, encouraging some investors to move money from stocks to bonds.
Interest rates on 10-year government bonds climbed to 4.24 percent--their highest since May--as the bond market finally began to reflect the increases in short-term interest rates imposed by the Federal Reserve.
Also discouraging investors today was the second-quarter report from Xerox Corp., whose profits were thinner than analysts had expected.
Most corporations have been reporting earnings in line with or a little better than projections. Beating expectations usually helps that company's own stock, but this quarter it isn't creating much overall excitement in the market.
Today better-than-expected earnings helped the shares of Avaya, the business software company, and NetFlix, the mail-order video rental service, but neither stock had the coattails necessary to lift other technology stocks.
The Nasdaq Stock Market composite index dropped 13 points to 2,166.74. The Standard & Poor's 500 stock index fell 5 points to 1,229.03. The Dow Jones industrial average fell 55 points to 10,596.48.
Analysts caution that even companies whose profits are stronger than expected can't expect to draw crowds of investors. Aggressive investors were already counting on many firms to beat estimates, which is why stocks have rebounded this summer.
Moving the market still higher will require an unexpected strengthening of the economy--or some big surprises in third quarter.