Stocks and Bonds: Stocks Retreat From Their Recent Gains as Investors Cash in Profits

The stock market peeled back some of its recent gains on Monday as investors cashed in profits and unwound their recent bets on the dollar, gold and oil.

Financial shares fell the most of 10 major market groups, and energy producers and companies that make industrial products like plastics and chemicals fell, reflecting some investors’ concerns that an ebullient rally had vaulted some corners of the stock market too high, too fast. Markets across Europe and Asia also tilted lower.

A new report on forward-looking economic signals underscored concerns about overly optimistic expectations in the stock market, even as it signaled that the recession was ending.

The Conference Board’s index of leading indicators improved for another month, bolstered by high supplier deliveries, improvements in credit markets and increases in building permits — all signals of an economy on the mend. But the index’s gain of 0.6 percent in August was lower than gains in the previous two months, and it disappointed forecasters, who had been expecting an increase of 0.7 percent.

Now that a number of economists, along with Ben S. Bernanke, the Federal Reserve chairman, have said the recession is probably over, investors are focusing on the shape of the recovery. Some expect a quick rebound as industries rebuild their supplies while others say that the economy may struggle for years.

The Dow Jones industrial average fell 41.34 points, or 0.4 percent, to close at 9,778.86. The Standard & Poor’s 500-stock index slipped 3.64 points, or 0.3 percent, to 1,064.66. But the Nasdaq composite index picked up 5.18 points, or 0.2 percent, to 2,138.04, aided by gains in some Internet and pharmaceutical stocks.

“The market has done this a couple of times,” said Richard Sparks, senior equity analyst at Schaeffer’s Investment Research. “We plateaued a little bit in May, had a little bit of a dip from mid-June to mid-July fast cash without a hassle. It’s healthy to have these very mild sell-offs.”

Indeed, financial markets have been ripping higher over much of the summer. The S.& P. 500 has risen about 20 percent since mid-July, and the Dow is nearly within striking distance of 10,000 points — a threshold it lost in early October as the financial crisis hit a fever pitch.

Shares of home builders, media companies and retailers like Abercrombie & Fitch were all lower, and big banks and regional financial companies slid. Health care companies, a defensive stock category, were one of only two market segments to finish higher.

The other, technology shares, got a lift from news that the computer company Dell planned to buy the information technology provider Perot Systems for $3.9 billion. The announcement lifted hopes that mergers and acquisitions among tech firms were rebounding. Dell closed 4 percent lower, while shares of Perot soared 65 percent.

Silver and platinum slid, and the price of gold fell slightly, to $1,003.70 an ounce. Crude oil futures dropped $2.33, to settle at $69.71 a barrel in New York on Monday.

The dollar rose against other leading currencies, a sign there was still appetite for the American currency, despite concerns about big deficits in the United States and a huge expansion of the money supply.

Interest rates were higher. The Treasury’s benchmark 10-year note fell 5/32, to 101 6/32 and the yield rose to 3.48 percent, from 3.46 percent late Friday.

Following are the results of Monday’s auction of three- and six-month Treasury bills:

Stocks and Bonds: Stocks Retreat From Their Recent Gains as Investors Cash in Profits

11:06 - 2009-Sep-21