Wall Street began a holiday-shortened week with a moderate pullback Monday as investors recoiled at bleak news from Toyota Motor Corp. and drugstore operator Walgreen Co.
The two companies — both viewed as better-positioned than many of their peers — provided more evidence that even stronger companies are struggling as consumers cut back their spending.
Walgreen's profit fell 10 percent in its fiscal first quarter, due mostly to the costs of opening more than 200 new stores, so the company said it will slow down its expansion. Toyota, meanwhile, slashed its earnings forecast for a second time, warning that it now expects to post an operating loss for the fiscal year through March.
It would be the Japanese automaker's first such loss since it began reporting results in 1941, and underscores the challenges facing car companies. Toyota's American rivals, General Motors Corp. and Chrysler LLC, received a $17.4 billion lifeline from the federal government last Friday to stave off bankruptcy.
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Monday's gloomy corporate news highlighted how weak the consumer is, said Kim Caughey, equity research analyst at Fort Pitt Capital Group. That's a troubling prospect, she said, because it appears the U.S. economy cannot rely on consumer spending to pull it out of its downturn.
"Even though mortgage rates are coming down, we don't see the consumer running out and buying that house," Caughey said.
On Tuesday, the Commerce Department reports on last month's new home sales, while the National Association of Realtors reports on existing home sales. Economists forecast that both pieces of data will show declines.
Analysts pointed out, though, that trading volumes were very low on Monday, and likely to stay that way throughout the week. So trading was choppy — the Dow fell by as many as 207 points before paring its losses — and the market's movements may not be indicative of its long-term direction.
"A truncated week is going to make it tough to generate any firm takeaways from trading," said Craig Peckham, equity trading strategist at Jefferies & Co. "I would expect to see sleepy volumes and a lot of people protecting positions going into year end."
Tax-loss selling — when investors sell securities at a loss to offset a capital gains tax liability — might also contribute to the market's weakness until the year's end, Fort Pitt's Caughey noted.
According to preliminary calculations, the Dow Jones industrial average fell 59.42, or 0.69 percent, to 8,519.69, after briefly moving into positive territory early in the session, tumbling, and then recovering some of its losses.
Broader stock indicators also finished lower. The Standard & Poor's 500 index fell 16.25, or 1.83 percent, to 871.63, and the Nasdaq composite index fell 31.97, or 2.04 percent, to 1,532.35.
The Russell 2000 index of smaller companies fell 11.19, or 2.30 percent, to 475.07. Smaller companies tend to be more vulnerable to economic weakness than larger companies.