- The Washington Times - Monday, April 6, 2009

NEW YORK (AP) - Wall Street pulled back in early trading Monday as investors paused from a four-week rally to take profits ahead of first-quarter earnings reports.

Signs of trouble in talks between IBM Corp. and Sun Microsystems Inc. also weighed on the market.

Investors have been more optimistic in recent weeks, sending the Dow Jones industrials up 22.5 percent since early March, amid improving economic data and as governments around the globe step up efforts to end the recession.

This week, investors will begin poring over first-quarter earnings for more clues on where the economy is headed _ and analysts warn that worse-than-expected reports could upset the market’s advance.

Even more important than companies’ results will be their forecasts for the remainder of the year. Sectors that will be in particular focus include banking, retail, technology and industrials.

“Companies have to come across with commentary that the worst is passed,” said Nicholas Colas, chief market strategist at BNY ConvergEx. “That is the most critical thing and you have to hear it from a broad range of companies in a wide variety of industries.”

In morning trading, the Dow fell 76.86, or 1.0 percent, to 7,940.73. The Standard & Poor’s 500 index fell 11.07, or 1.3 percent, to 831.43, while the Nasdaq composite index fell 28.95, or 1.8 percent, to 1,592.92.

Aluminum producer Alcoa Inc. kicks off earnings season on Tuesday. There are no economic reports or major earnings scheduled for Monday.

Anticipating a pullback as earnings get underway, investors were taking profits off the table Monday following the market’s massive gains, analysts said.

Meanwhile, IBM’s talks with Sun Microsystems appeared to be in jeopardy, adding to the market’s jitters. The discussions were in their final stages in recent days, but The Associated Press learned that IBM took its $7 billion offer off the table on Sunday after Sun terminated IBM’s status as its exclusive negotiating partner.

It was unclear whether talks were continuing, or if Sun was trying to find an alternative suitor to IBM. Sun shares plunged more than 23 percent, falling $2 to $6.49. IBM fell $1.22 to $101.

In other trading, the Russell 2000 index of smaller companies fell 8.63, or 1.9 percent, to 447.50.

About four stocks fell for every one that rose on the New York Stock Exchange where volume came to 161.8 million shares.

On Friday, the Dow rose 39 points to close above the 8,000 mark for the first time in nearly two months, logging a fourth straight week of gains and its best performance since 1933.

Even a bleak jobs report on Friday wasn’t enough to rattle Wall Street’s newfound confidence that has lifted the major indexes from 12-year lows in early March.

The financial sector, which has largely carried the recent rally, will remain in top focus, as investors await results of the government’s stress tests of the nation’s biggest banks. The stress tests, which aim to determine which banks might be in need of more capital if economic conditions worsen, are expected to be complete by the end of this month.

Over the weekend, London-based bank HSBC raised about $18 billion in a successful stock offering. Shares added 7 cents to $32.68 in early trading.

Treasurys rose slightly, pushing the yield on the 10-year note down to 2.89 percent from 2.90 percent late Friday. The dollar was mixed against other major currencies, and gold prices fell.

Light, sweet crude for May delivery fell $1.81 to $50.70 a barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average rose 1.2 percent, while Hong Kong’s Hang Seng index rose 3.1 percent. Major European indexes turned lower in afternoon trading. Britain’s FTSE 100 slipped 1.3 percent, while Germany’s DAX index fell 1.3 percent and France’s CAC-40 fell 1.3 percent.

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