Stocks fell Tuesday, as investors took profits and beat up the commodity stocks that led Wall Street’s early January rally.
“What you’re seeing right now is gold, silver, oil, aluminum, copper — anything you can drop on your foot and it hurts, is retreating,” said Gary Kaltbaum, a money manager in Orlando, Fla.
The run up in commodities prices “went too far too fast,” he said. Copper prices, for instance, broke through $4,000 a ton three months ago and passed $5,000 a ton last week. Aluminum recently had its best price since August 1988.
The $2-plus drop in oil prices hurt oil stocks, but investors didn’t move their money into financial or semiconductor stocks, as they did the last time oil dropped, said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
“A lot of [the selling] is technical,” he said. “People are selling off the winners they had in January.”
The Dow Jones industrial average finished the day down 48.51 points, or 0.45 percent, while the broader Standard & Poor’s 500-stock index was off 10.24 points, or 0.81 percent. The technology-laced Nasdaq composite index gave up 13.84 points, or 0.61 percent.
Crude oil futures dropped as U.S. weather remained mild, petroleum inventories remained strong and fears receded over possible disruptions to Iranian oil.
The mood on the Street seems to have changed, with investors returning to the jitters that largely defined 2005.
While Tuesday’s earnings surprises were positive, with Walt Disney Co. and Emerson Electric Co. beating analysts’ expectations, they weren’t enough to send the indexes higher.
“The market wants to focus on other things,” said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. The message, he said, is that investors aren’t enamored with stocks and are waiting for a big catalyst that will lift stocks.
One measure of the sentiment shift: One of the Street’s most bullish strategists, Prudential Financial’s Ed Keon, cut his recommended stock weighting to 55 percent this week from the 100 percent allocation he has recommended since July.
In a note this week he wrote, “The bull case for U.S. stocks took some hits last week. The weak GDP [gross domestic product] report led to an apparent drop in productivity and higher than expected rise in unit labor costs,” which hurt the case for lower inflation. He added first-quarter corporate earnings expectations, without energy stocks, “might not be much above zero” and said the situation in Iran heightens uncertainty.
Google Inc. illustrated the market’s “in today, out tomorrow” mentality. The stock fell $17.18, or 4.5 percent, to $367.92, as poor sentiment around the stock carried over from its Feb. 1 earnings report, which came in below analysts’ expectations.
In other company news, luxury home builder Toll Brothers Inc. fell $1.73 to $29.47 after its first-quarter revenue rose 35 percent to about $1.33 billion, but the company lowered guidance for home deliveries this year, saying it sees softening demand in a number of markets.
Apple Computer Inc. rose 30 cents to $67.60 after the technology company introduced a new iPod music player at a discounted price. The company also cut prices on some already available iPods.
Coca-Cola Co. rose 9 cents to $41.03 after the world’s largest beverage maker’s fourth-quarter profits dropped 28 percent, but beat analysts’ expectations, once items were excluded.
Industrial equipment maker Emerson Electric rose $2.09 to $78.96 after profit for its first-quarter jumped by about one-third, helped by improved sales at its automation, climate-control, and appliance and tool segments. The company also increased its guidance for fiscal 2006.
Disney rose $1.74 to $26.70 after the entertainment company reported a better-than-expected 7 percent increase in third-quarter net income. While profits at its studio slumped, increased advertising at ABC and ESPN and a strong performance from its theme parks helped. Disney also announced its expected $2.7 billion deal to sell the bulk of its radio assets to Citadel Broadcasting Corp.
General Motors Corp., struggling with billions of dollars of losses in North America, said it is cutting in half its yearly dividend to $1 a share and reducing the salaries of its chairman and senior leadership. The announcements came a day after a top aide to billionaire investor Kirk Kerkorian was elected to GM’s board. Before the dividend cut, GM’s yield was 8.6 percent, the highest of the 387 issues in the S&P 500 that pay a cash dividend.
GM fell 53 cents to $22.81.
Overseas, Japan’s Nikkei stock average fell 0.16 percent. In Europe, Britain’s FTSE 100 lost 0.44 percent, Germany’s DAX index added 0.11 percent and France’s CAC-40 rose 0.02 percent.