By Saumya Vaishampayan And Alexandra Scaggs
U.S. stocks inched lower Tuesday, a day after the Dow
industrials posted their biggest one-day decline since early
October.
Stocks in Europe stabilized, with the Stoxx Europe up 0.5%, even
as other investments extended their moves from turbulent Monday
trading. Oil prices continued to slide, and U.S. Treasury prices
rallied further, pushing the yield on the 10-year note below
2%.
The Dow Jones Industrial Average dropped 13.68 points, or 0.8%,
to 17487.97, and the S&P 500 slipped 1.84 points, or 0.09%, to
2018.74. The drop follows the steepest single-session drop for the
Dow and S&P 500 since Oct. 9. The Nasdaq Composite Index
slipped 15.77 points, or 0.34%, to 4636.8.
Early trading was choppy. Some investors were hesitant to buy
amid lingering worries over the ongoing decline in oil prices and
political instability in Europe, said Michael O'Rourke, chief
market strategist at JonesTrading. Even with Tuesday's gains, the
S&P 500 is down 1.6% in the first three trading days of the
year.
"It was a rough start to the year," said Mr. O'Rourke. So now,
"everyone is in this holding pattern."
Demand increased for assets considered to be havens on Tuesday.
Treasurys gained, with the yield on the 10-year Treasury note
falling to 1.990% from 2.038% on Monday. Yields fall as prices
rise. Gold futures advanced 0.3% to $1208.10 an ounce.
Crude-oil futures continued to fall Tuesday, down 2.6% to $48.75
a barrel. Oil prices have tumbled more than 50% since mid-June.
Energy stocks stabilized in early trading, however. The sector
was recently up less than 0.1%, after slumping 4% Monday.
While the decline in oil prices has led to lower gasoline prices
and boosted the fortunes of consumers, it has also curbed profits
for the once-booming energy sector, which has grown in recent years
to become a bigger part of the U.S. economy.
"In the short term, it's stimulative for the economy and should
be good for stocks," said John Brady, managing director at futures
brokerage R.J. O'Brien, referring to lower oil prices. "It's almost
like a tax cut."
"Longer term, there will be concerns about capital investment,
especially in the oil and energy sectors, and you could see
employment losses," which could be negative for stocks, he
added.
Still, many investors expect stocks to gain this year, driven by
an improving economy and rising corporate profits. Analysts expect
companies will report 7.8% of earnings growth in 2015, according to
FactSet.
Earnings reporting season for the fourth quarter of 2014
unofficially kicks off Jan. 12 with Alcoa Inc.'s report. Companies
are expected to report 2.4% of earnings growth, according to
FactSet, and 1.1% of sales growth from the previous year.
Tuesday's economic data was mixed. Service-sector activity grew
at a slower pace than expected in December, according to the
Institute for Supply Management. Its non-manufacturing purchasing
managers' index slipped to 56.2 from 59.3 in November, while
economists expected a reading of 58.0. But factory orders fell by
less than expected in November, the Commerce Department reported,
dropping 0.7% while a 0.8% decline was expected.
Asian stocks fell Tuesday, led by a 3% decline in Japan's Nikkei
Stock Average. The commodity-sensitive Australian benchmark index
lost 1.6%.
The Bank of Japan is likely to cut its price forecast again for
the year ending in March because of the slump in global oil prices,
The Wall Street Journal reported. Any cuts to its price projections
could add to expectations for further policy action by the central
bank.
In corporate news, Coach Inc. rose 0.4% after announcing it has
agreed to acquire shoe brand Stuart Weitzman for $574 million.
Coach will pay private-equity firm Sycamore Partners $530 million
in cash and up to $44 million in contingent payments if it hits
certain revenue targets over the next three years.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and
Alexandra Scaggs at alexandra.scaggs@wsj.com
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