Major indexes tumble amid drop in U.S. dollar after weekend G7 meeting, profit taking after rally.
September 22, 2003: 5:43 PM EDT
By Alexandra Twin, CNN/Money Staff Writer
NEW YORK (CNN/Money) - U.S. stocks fell Monday, with weakness in the U.S. dollar following this weekend's G7 meeting giving investors an incentive to take profits on the rally's most recent leg.
"I think the market right now is not only bumping up against economic concerns -- such as the currency issue today -- but also technical ones, making it perhaps a good time to be on the sidelines," said Scotty George, chairman at du Pasquier Asset Management.
"Stocks have run up so far, so quickly that it's reasonable for investors to want to take some profits right now," George added.
That selling pressure could perhaps continue over the next few sessions. With no new economic data expected until Thursday, markets are likely to trade on momentum and earnings news as the quarter winds down. Among the factors likely to influence trade early Tuesday: earnings reports from three brokerage firms due before the bell.
Goldman Sachs (GS: down $1.07 to $92.66, Research, Estimates) is forecast to have earned $1.22 per share, up from $1 a year earlier; Lehman Brothers (LEH: down $0.44 to $70.21, Research, Estimates) is expected to have earned $1.35 per share, up from 70 cents a year earlier; Morgan Stanley (MWD: down $1.23 to $51.15, Research, Estimates) is expected to have earned 69 cents per share, up from 55 cents a year earlier.
Monday's market
All three major indexes closed lower. The Nasdaq composite (down 31.08 to 1874.62, Charts) lost 1.6 percent, while the Dow Jones industrial average (down 109.41 to 9535.41, Charts) lost 1.1 percent and the Standard & Poor's 500 (down 13.48 to 1022.82, Charts) index lost 1.3 percent.
The dollar fell about 1.5 percent from late Friday to about ¥112.11. The dollar gained modestly on the euro, with the European currency buying $1.1470, down from $1.1475 late Sunday.
After rising sharply last week to new multimonth highs, stocks were perhaps vulnerable to some consolidation, and nervousness following the weekend meeting of the Group of Seven (G7) certainly provided the vehicle.
Finance ministers meeting in Dubai, United Arab Emirates, called for more flexibility in the exchange rate and basically showed disapproval of countries that seek to manipulate their currency to protect their exports. That was seen as referring to a number of Asian countries in particular.
The dollar's decline this year has partly been stemmed by the fact that Asian governments, in particular Japan, have intervened to prevent the U.S. currency from weakening too much, which would then hurt the competitiveness of their exports in world markets. The concern is that if they won't be intervening any more, the dollar could fall even more.
That concern sent the dollar lower versus other major currencies, pressured international stock exchanges and U.S. Treasurys, and also drew new buyers into gold -- all of which conspired to send U.S. stocks lower.
However, stocks may have been set for some sliding after hitting new multimonth highs last week. Despite a slight decline last Friday, all the major indexes closed the week higher, due to a big surge earlier in the week that put the Nasdaq at an almost 18-month high and the Dow and S&P 500 at an almost 15-month high.
"The story of the day is certainly the G7 meeting, but I think it's a short-term negative," said Peter Cardillo, director of research at Global Partners Securities. "This is giving investors a good excuse to take money off the table after the recent rally."
Stocks on the slide
Among specific issues, companies particularly dependent on exports, like technology and automakers, led the decliners.
Market breadth was decidedly negative, with losers beating winners by three to one on the New York Stock Exchange, where 1.23 billion shares traded, and by eleven to five on the Nasdaq, where 1.70 billion shares traded.
On the Dow, 26 out of 30 stocks declined.
Components Microsoft (MSFT: down $0.89 to $29.07, Research, Estimates) and Intel (INTC: down $0.65 to $28.52, Research, Estimates) fell 3 percent and 2.2 percent, respectively. The two are Dow members and also trade on the Nasdaq. Alcoa (AA: down $0.79 to $27.66, Research, Estimates) and Hewlett-Packard (HPQ: down $0.85 to $20.30, Research, Estimates) were the other big Dow decliners. Alcoa lost 2.8 percent, while HP lost 4 percent.
3M (MMM: up $0.14 to $142.12, Research, Estimates), Eastman Kodak (EK: up $0.15 to $27.95, Research, Estimates) and Coca-Cola (KO: up $0.06 to $43.24, Research, Estimates), companies whose business would benefit from the weaker dollar, managed to stay above the breakeven line.
In addition, AT&T (T: up $0.38 to $22.88, Research, Estimates) stock gained 1.7 percent and was one of few Dow gainers after the telecommunications company said it would buy back $1.1 billion of debt.
Also on the upside, Motorola (MOT: up $0.97 to $12.06, Research, Estimates) rallied 8.8 percent and topped the NYSE's most-active list after the company's CEO said Friday he will retire following a disagreement with the company's board regarding strategy. In response, at least five brokerage firms upgraded the stock Monday, seeing the move as a positive for the company.
Sun Microsystems (SUNW: down $0.14 to $3.96, Research, Estimates) and Applied Materials (AMAT: down $0.81 to $19.67, Research, Estimates) both lost more than 3 percent in active Nasdaq trade.
Treasury prices fell sharply, sending the 10-year note yield up to 4.23 percent from 4.16 percent late Friday.
NYMEX light crude oil futures rose 12 cents to settle at $27.19 a barrel. COMEX gold gained $5.40 to settle at $388.30.
The ascendant yen punished Asian markets. In particular, Tokyo's Nikkei index fell 4 percent Monday, its worst loss in two years. European markets also closed much weaker.
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