NEW YORK (CNN/Money) -
U.S. stock markets edged lower Monday, after investors shrugged off enthusiasm about the early transfer of power in Iraq. A negative forecast from General Motors and worries about the upcoming Federal Reserve policy-setting meeting also contributed to Wall Street's retreat.
The Nasdaq composite (down 5.65 to 2,019.82, Charts) lost around 0.3 percent, the Dow Jones industrial average (down 14.75 to 10,357.09, Charts) lost just over 0.1 percent and the Standard & Poor's 500 (down 1.08 to 1,133.35, Charts) index lost nearly 0.1 percent. All three had been weaker in the early afternoon and had been in positive territory in the morning.
Investors initially pushed stocks higher on news of the early transfer of power in Iraq. The handover from the Coalition Provisional Authority to a temporary government was due to happen June 30, but it occurred two days early in an apparent bid to thwart any sabotage.
However, any eagerness surrounding this event fizzled out in the afternoon, as analysts had cautioned, with the handover marking just one of three big, potentially market-moving events this week.
Donald Selkin, director of research at Joseph Stevens said the market's inability to hold its morning gains was a bit disappointing, but he chalked it up to some general anxiety about the Federal Reserve meeting over the next couple of days.
The central bank holds its policy-setting meeting Tuesday and Wednesday and is widely expected to boost the fed funds rate by a quarter-percentage point. This kind of rise is already built into the market, most analysts say, and should provide little surprise. However, there may be some investor nervousness regarding the central bank's statement and what it implies about future rate cuts.
There is also the possibility that the Fed will raise rates by a half-percentage point, although that is not expected. "A 50 basis point rise would be good for the economy, but not the stock market," said Brian Bensch, investment manager at Melhado, Flynn & Associates.
Following that is Friday's June payrolls report.
The stock market has essentially traded in a range since February, as part of a broad consolidation after the tremendous runup of last year. The listless trade intensified over the past few weeks.
Some analysts hope that once this week's events pass and the second-quarter earnings reporting period begins the week of July 5, stocks will be able to break out of their range.
"If we can hold this range through the week, and the situation in Iraq stays relatively calm. Then (if) earnings start coming in strong next week, as they're expected to, we could see a summer rally," Selkin said.
After the close of trade Monday, Washington Mutual (WM: up $0.13 to $41.31, Research, Estimates) cut its 2004 profit forecasts, saying an expected rise in long-term rates will hurt its mortgage business. The company now expects to earn between $3 and $3.60 per share versus Wall Street analysts' expectations for a profit of $4.05 per share. Shares fell more than 10 percent in after-hours trade.
Also likely to impact early trade Tuesday, the June Consumer Confidence index, due shortly after the open. Economists surveyed by Briefing.com expect it to have risen to 95.0 in June from 93.2 in May.
GM and other movers
Weighing on the Dow, General Motors (GM: down $1.14 to $46.51, Research, Estimates) lost 2.4 percent after wire reports quoted a company executive predicting that June vehicle sales were disappointing and that demand has slipped. The GM vice president for product development make the remarks at an industry group meeting in Switzerland.
Other big decliners included Boeing (BA: down $1.09 to $50.21, Research, Estimates), down 2.1 percent and McDonald's (MCD: down $0.41 to $26.58, Research, Estimates), down 1.5 percent.
Among the Dow's gainers, shares of Altria (MO: up $1.80 to $49.60, Research, Estimates) climbed 3.7 percent. Tobacco stocks rose after the judge in the Justice Department's $280 billion racketeering lawsuit against major tobacco companies agreed to allow an appeals court to review one of her decisions.
Yahoo! (YHOO: up $0.57 to $35.48, Research, Estimates) gained 1.6 percent, retreating from stronger gains earlier after its Overture Services unit said it was launching a paid search option for local listings, as a means of better competing with rival Google.
Shares of Watson Pharmaceuticals (WPI: down $4.80 to $27.49, Research, Estimates) lost nearly 15 percent after the company warned that second-quarter and full-year earnings would miss expectations due to weak sales of women's health and urology products. Other generic drugmakers tumbled in tandem, including Barr Pharmaceuticals (BRL: down $2.30 to $33.40, Research, Estimates), down more than 6 percent.
Market breadth was negative. Losers beat gainers by nearly nine to seven on the New York Stock Exchange, where 1.35 billion shares traded. On the Nasdaq, decliners topped advancers by nearly the same margin, on volume of 1.59 billion shares.
Also of interest Monday, reports showing that personal income held steady in May, while spending grew from the previous month.
Oil prices crept lower following the smooth transition in Iraq. NYMEX light sweet crude oil futures fell $1.31 to settle at $36.24 a barrel. Among other commodities markets, COMEX gold fell $1.90 to settle at $401.30 an ounce.
Treasury prices tumbled following the release of the economic news, pushing the 10-year note's yield up to 4.73 percent versus 4.64 percent late Friday. The dollar gained versus the yen and euro.
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