It was a quiet start after the upswing last Friday, which saw the Dow Jones industrial average and the Nasdaq indexes pushing above their levels at the end of 2010, and the broader market as measured by the Standard Poor’s 500-stock index rallying nearly 6 percent over the five-day trading period.
At the end of the day, the three indexes floundered with declines of about 2 percent. The Dow and the Nasdaq were once again down for the year, and the SP pressed deeper into negative territory, down more than 4 percent compared with 2.63 percent for the year as of last Friday.
Analysts noted that a number of the drivers of market sentiment in recent weeks — economic data and the prospect for some form of decisive action in Europe — were uninspiring. Stocks that traded in the sectors most sensitive to economic growth took hits, with industrials, materials and financials more than 2 percent lower near the end of the trading session on Monday.
But they also attributed the declines on Monday to technical reasons, as key levels in the indexes proved resistant to breakthrough.
“The market was heavily oversold,” said Quincy Krosby, a market strategist for Prudential Financial. “Whenever that happens you are due for a bounce. It moved up too far, too fast.”
Ms. Krosby added that last week’s gains were not accompanied by strong volumes, which suggests that the rally was not viable enough to extend the gains.
“It means that new buyers are not coming in,” she said. “The conviction is not there. Volume is always the conviction of the bulls.”
The gains from last week had ridden the crest of improved retail data in the United States and took place just ahead of a meeting of finance ministers from the Group of 20, when analysts said that they believed fear about Europe’s debt crisis had faded somewhat in the last few days.
But on Monday, Germany sought to play down expectations of a decisive breakthrough at an another meeting, a summit of European leaders this weekend on the euro zone troubles.
At a news conference, Chancellor Angela Merkel’s spokesman, Steffen Seibert, said that the chancellor had pointed out that “the dreams that are once again cropping up, that by Monday this package will have solved everything and it will all be over, once again cannot be fulfilled.”
“These are important working steps on a long path,” he said. “This is a path that with certainty runs far into next year and also additional working steps will have to follow.”
“Part of the reason the market was able to move up was on the hopes and prayers that the Europeans would craft a credible plan in time for the meeting,” Ms. Krosby said. “They just threw cold water on that.”
The Dow Jones industrial average was down 2.13 percent at 11,397.00. The S.P. 500-stock index was 1.9 percent lower, or down 23. 72 points, at 1,200.86. The Nasdaq composite index was down 1.9 percent at 2,614.92.
The benchmark Euro Stoxx 50 closed down 1.68 percent.
Interest rates were slightly lower. The yield on a 10-year Treasury note was 2.15 percent compared with 2.25 percent.
“Optimism is fading,” Frank M. Pavilonis, MF Global’s senior market strategist, said, referring to Europe.
Economic data from the United States on regional manufacturing and another report on industrial production were weak, or “market neutral,” as Jonathan Lewis of Samson Capital Advisors put it.
“We are really operating in a twilight zone for markets,” Mr. Lewis said, referring to what he described as a lack of clarity from the economic data and the euro zone situation.
In the United States, economic data has been mixed.
On Monday, a report from the Federal Reserve Bank of New York on regional manufacturing showed no improvement in its index for overall business conditions in October. In a research note, economists from Goldman Sachs said that suggested “generally downbeat” views of the current economic situation, although some components of the index stabilized.
Industrial production as reported by the Federal Reserve showed a month-on-month 0.2 percent rise for September, just as analysts had forecast. Manufacturing production firmed 0.4 percent in that period, which economists said reflected some recovery from the disruptions related to the Middle East turmoil and the earthquake in Japan earlier in the year.
“With a mixed performance in September, the U.S. manufacturing sector now seems to have fully recovered from the supply chain shocks caused by the Japanese tsunami,” said Cliff Waldman, economist for the Manufacturers Alliance, in a statement.
Analysts said that as financial results trickled in, stocks would continue to weather the outlook for the United States economy. Financial stocks were hardest hit, falling as a sector about 3.3 percent. That was on a day when more banks weighed in with quarterly results.
Wells Fargo, the largest consumer lender in the United States, was down 8.4 percent at $24.42. It reported Monday that its third-quarter earnings rose 21 percent, even as a drop in revenue indicated a disappointing sign for the San Francisco-based bank.
Citigroup announced a profit of $3.8 billion, or $1.23 a share, beating analyst consensus estimates of 81 cents per share. It was down 1.6 percent at $27.93.
Shares in companies in the materials sector declined 3 percent, with Alcoa down 6.6 percent at $9.58 and United States Steel more than 6 percent at $22.98.
Eric Dash, Ben Protess, Stephen Castle and Liz Alderman contributed reporting.
Article source: http://www.nytimes.com/2011/10/18/business/daily-stock-market-activity.html?partner=rss&emc=rss
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