Wall Street suffered from an early summer malaise Monday, with stocks closing a lackluster session moderately lower as investors waited for news on interest rates, the changeover in Iraq and second-quarter earnings.
The markets saw low volatility, light volume and very little conviction ahead of next week’s Federal Reserve meeting, during which the Fed’s Open Market Committee was expected to decide on an interest rate hike.
Investors were also looking to the June 30 handover of power in Iraq, hoping tensions would start to ease there. Many also awaited second quarter earnings, expected next month.
“On the one hand we have some positive earnings to look forward to, but on the other, we have these interest rate questions and the geopolitical risks,” said Keith Keenan, vice president of institutional trading at Wall Street Access. “But all that means this week is that we’re in a holding pattern. There’s just no motivation on the part of buyers or sellers.”
At the close, the Dow Jones industrial average was down 45 points, or 0.4 percent, while the broader Standard & Poor’s 500-stock index was off 5 points, or 0.4 percent. The technology-rich Nasdaq composite index finished the day down 12 points, or 0.6 percent.
Most investors expected the Fed to make a quarter percentage point hike in the benchmark rate, currently at a 43-year low of 1 percent, which some analysts think could prompt a rally through the summer months. The possibility of a half-point rise — or, more unlikely, no hike at all — would likely roil the markets instead of providing a boost to stock prices.
The financial sector continued to see a great deal of merger activity. This time, Wachovia Corp. announced it would purchase rival bank SouthTrust Corp. in a deal valued at $14.3 billion. The deal would give Wachovia a strong footing in the South. Wachovia dropped $1.58 to $45.42, while SouthTrust jumped $4.86, or 14 percent, to $39.66.
“This was widely rumored, so when Wachovia announced it, it wasn’t a huge impact,” said Brian Pears, head equity trader at Victory Capital Management. “There was a little spillover into smaller banks that could be takeover targets, but not a huge amount. I think that’s an acknowledgement of how hard it is to extract value from these deals.”
Simon Property Group Inc., North America’s largest shopping mall owner, fell 68 cents to $51.62 after it said it would buy Chelsea Property Group, which operates 60 outlet centers and shopping malls, for about $3.5 billion. Chelsea surged $6.70 to $64.94.
Monsanto Co. boosted its quarterly and yearly earnings outlook, crediting tax cuts and a good growing season for its agricultural products. Monsanto was up 28 cents at $35.70.
Walgreen Co. rose 90 cents to $35.80 after beating Wall Street estimates by a penny on its latest quarterly earnings report. The drugstore chain said cost cutting and a jump in prescription drug sales fueled its gains.
Goodyear Tire & Rubber Co. posted a narrower-than-expected loss thanks to a 21 percent increase in revenues from a year ago. The tire maker fell 10 cents to $9.79.
Advancing issues outnumbered decliners by nearly 5 to 4 on the New York Stock Exchange, where volume came to 821.10 million shares, compared with 1.07 billion on Friday.
Overseas, Japan’s Nikkei average rose 1.9 percent. In Europe, Britain’s FTSE 100 closed down 0.1 percent, France’s CAC-40 was flat for the session and Germany’s DAX index lost 0.3 percent.