Taking no chances before first-quarter earnings reports begin, investors collected profits and sent stocks sharply lower Monday, erasing nearly all the gains the Dow Jones industrials enjoyed during their March rally.
Analysts said Wall Street was concerned that earnings might not be solid enough to justify the rally this month. Low volume, which tends to exaggerate the market's losses or gains, was another factor as traders prepared to celebrate Passover and Easter.
The Dow closed down 146 points, or 1.4 percent, at 10,281.67, its fourth consecutive decline. The average last closed lower on Feb. 28th at 10,106.13.
Broader stock indicators also slipped. The Standard & Poor's 500 index lost 16.83, or 1.5 percent, closing at 1,131.87, and the Nasdaq Composite Index fell 38.90, or 2.1 percent, to 1,812.49.
Although the start of first-quarter reports is still a week away and relatively few companies have indicated they won't meet expectations, two difficult years on the market have taught many investors to play it safe and not leave themselves too exposed. As a result, Wall Street is more inclined to sell on uncertainty rather than risk disappointment.
"People want earnings season to start so they can at least get some corroboration that things have turned," said Will Braman, chief investment officer
with John Hancock Funds. "When there's this kind of uncertainty . . . the natural reaction is to curl up in a ball in the fetal position and that's what the market is doing."
Monday's losses appeared most concentrated in the tech sector, which has struggled in recent weeks on doubts it will turn around as quickly as hoped. IBM slipped $2.04 to $103.56, while Intel finished down 59 cents at $30. Both are Dow components.
But the broader market also lagged. McDonald's fell 43 cents to $27.22, continuing a decline that began Friday on an earnings warning. Boeing lost 67 cents to $45.72.
The stock of the holding company for America West fell 26 cents to $5.21 after the airline announced it was reducing some fares, a move viewed as potentially limiting revenues. The selling spread to other airlines, including Delta, which lost $2.15 to $30.99.
Investors also bid Philip Morris down $1.53, or 2.9 percent, to 51.96 after an Oregon jury ordered the company to pay $150-million in damages in a case involving low-tar cigarettes. The tobacco company plans an appeal.
Oil service stocks were one of the few bright spots as the sector rebounded from selling last week. Baker Hughes, which reduced its first-quarter outlook Friday, advanced 49 cents to $37.24.
Despite a big rally early this month, stocks have pulled back in recent sessions as investors sell rather than risk losing their winnings should the market's momentum fizzle. The problem is that although economic data is strengthening, business profits have yet to indicate the same.
First-quarter earnings season could give investors a better idea of how business is doing.
"More important than the numbers will be outlooks for earnings: What's going on, what CFOs and CEOs think business will look like for the rest of the year," said Matt Brown, head of equity management at Wilmington Trust. "The market is not cheap right now, so we really need something like this to get us going."