updated 8/1/2006 8:45:50 AM ET 2006-08-01T12:45:50

Stocks finished Monday with modest losses, as investors locked in gains from last week’s solid rally . A handful of disappointing earnings and intensifying conflicts in the Middle East kept many traders on edge.

Major Market Indices

New attacks in Israel and Lebanon, along with a United Nations ultimatum on Iran’s nuclear program, made Wall Street cautious and sent crude oil futures higher on fears of supply disruptions. The price of a barrel of light crude rose $1.16 to settle at $74.40 in trading on the New York Mercantile Exchange.

Investors also faced new uncertainty over the possibility of another interest rate hike from the Federal Reserve after St. Louis Fed President William Poole said odds were 50-50 on a rate hike at the next Fed meeting Aug. 8.

With disappointing earnings forecasts from Tyson Foods Inc. and Valero LP adding to the market’s concerns, many investors collected profits from last week’s rally and perhaps opted to wait for Friday’s job creation report from the Labor Department before making any new moves.

“Last week we had a pretty healthy rally, but it’s tough to say at this point whether there is a lot of upside here,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “The fact remains that the market is struggling, the economy is struggling and the outlooks for both are very unclear.”

The Dow Jones industrial average finished the day down 34.02 points, or 0.3 percent, having surged 3.2 percent last week, chalking up its best weekly gain since May 2005.

The broader Standard & Poor’s 500-stock index closed Monday down 1.89 points, or 0.2 percent, while the Nasdaq composite index lost 2.67 points, or 0.1 percent.

The market’s major indexes finished July mixed. Wall Street now heads into August with chronic uncertainties about the economy, interest rates and oil prices. For July, the Dow rose 0.32 percent and the S&P 500 gained 0.51 percent, but the Nasdaq composite tumbled 3.71 percent due to sell-offs in technology and small-cap shares.

Bonds traded in a narrow range Monday, with the yield on the benchmark 10-year Treasury falling to 4.98 percent from 4.99 percent late Friday. The dollar fell against other major currencies.

There was little discernible reaction to the Chicago purchasing managers’ index, which rose to 57.9 in July from 56.5 in June. The increase showed modest strengthening in manufacturing, but Tuesday’s Institute for Supply Management index is considered a better economic gauge.

However, Tuesday will also bring personal income and spending data from the Commerce Department, which is a much stronger indicator of both economic strength and inflation. That, combined with Friday’s jobs report, could help investors augur the Fed’s move next week.

“We got those two big economic reports out this week, and those are really our only market movers,” said Scott Wren, equity strategist at A.G. Edwards & Sons. “Earnings have been good so far, but as in past quarters, that’s not the driver here. It’s about economic data and the Fed.”

Nonetheless, Tyson’s third-quarter earnings report raised concerns about a usually solid sector, with the world’s largest meat processor reporting losses in its chicken and beef businesses and missing Wall Street forecasts. Tyson, which also lowered its future profit forecasts, fell 42 cents to $14.15.

Valero LP fell 68 cents to $51.26 after the energy company’s profits also fell below analysts’ estimates despite a more than fourfold increase in revenues. Investors were also disappointed with the company’s guidance for the second half of the year.

Dow industrial Pfizer Inc. said Jeffrey B. Kindler will take over for Chief Executive Hank McKinnell . Kindler is a former CEO of two McDonald’s Inc. subsidiaries. Pfizer slid 12 cents to $25.99 on the news, released late Friday.

Fellow Dow component Wal-Mart Stores Inc. rose 4 cents to $44.50 after the retailer reported July sales at stores open at least one year, or same-store sales, rose 2.4 percent, at the high end of the company’s previous estimates.

Overseas, Japan’s Nikkei stock average rose 0.74 percent. In Europe, Britain’s FTSE 100 closed down 0.78 percent, France’s CAC-40 dropped 0.38 percent and Germany’s DAX index lost 0.41 percent.

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