Bulls were sidelined in New York as an advance in crude prices renewed pressure on investor sentiment. Weakness among pharmaceutical stocks drowned out enthusiasm from Bank of America’s better than expected results.
Oil prices rose on news of a breakdown in negotiations between the US and Iran, as well as concerns about tropical storms in the Gulf of Mexico. NYMEX light crude for August delivery was up US$2.16 to US$131.04.
The Dow fell 29.23, or 0.25 per cent to 11467.34, while the broader S&P 500 edged 0.68 points, or 0.05 per cent lower to 1260. The NASDAQ was down 3.25, or 0.14 per cent at 2279.53.
Shares of pharmaceuticals Merck and Schering-Plough retreated after a study found that their cholesterol-lowering drug Vytorin didn't lower the risk of heart valve problems or the need for surgery.
Merck shares closed 6.2 per cent lower, while Schering-Plough dropped 11.6 per cent. Both companies were slated to report second quarter earnings before the opening bell but decided to delay their announcements until the market closed.
After the close, Schering-Plough said its profit for the quarter fell to US24c per share from US34c per share last year. Excluding accounting adjustments and charges the company earned 45c per share, which was above consensus forecasts. However, the company was trading down as much as 5 per cent in after hours trade.
Meanwhile, Merck reported earnings per share of US82c, up from US77c during the last year’s corresponding quarter. Its shares were down 5.2 per cent in extended trade.
Elsewhere, Bank of America reported that profit for the second quarter fell 41 per cent to US$3.41 billion. However, the result topped analyst forecasts and the banking giant's shares ended 3.9 per cent higher.
Last week a number of banks reported earnings that came in ahead of Wall Street expectations. These included Citigroup, JPMorgan and Wells Fargo.
On Monday, Citigroup advanced 1.8 per cent, JPMorgan fell 3.4 per cent and Wells Fargo slipped 1.2 per cent. Elsewhere in the sector, Merrill Lynch and Goldman Sachs both fell 1.1 per cent.
Meanwhile, Fannie Mae jumped 5.5 per cent. However, Freddie Mac fell 4.7 per cent on talk that it would sell up to US$10 billion in new shares to raise capital. Currently, the government-backed lender has a market capitalisation of about US$5.6 billion.
American Express dropped 3.1 per cent in anticipation of its second quarter earnings announcement. After the close, the company reported net income of US56c per share, down from 88c per share last year. The result was significantly below expectations of US83c per share.
Elsewhere, Yahoo! said activist investor Carl Icahn, who had been pushing for a deal with Microsoft, would join its board. Market watchers said the settlement dramatically reduced the likelihood of a takeover by Microsoft.
Yahoo! shares closed 3.5 per cent lower, while Microsoft was down 0.9 per cent.
Apple, which reported quarterly earnings after the bell, tacked on 0.7 per cent during regular trade.
The company said fiscal third quarter net income was US$1.19 per share, up 31 per cent on last year’s result and topping expectations of about US$1.08 per share.
However, Apple shares slid as much as 10 per cent in after hours trade as investors expressed disappointment at the company’s fourth quarter outlook.
COMEX gold for August delivery settled US$5.70 higher at US$963.70 an ounce.
On the economic front, the Conference Board’s leading indicator index decreased 0.1 per cent in June, as expected. This was its second consecutive month monthly side.
The index is a composite of ten economic indicators designed to predict turning points in the economy.
UK Markets
British blue chips closed higher on Monday as better than expected results from Bank of America helped local financials rally. Meanwhile, firmer commodity prices gave a lift to oils and miners after a recent sell-off.
The FTSE 100 added 27.9 or 0.52 per cent to 5404.30.
Banks extended earlier gains after Bank of America reported profit fell less than expected as improved investment banking and trading results offset a surge in bad debt.
Barclays added 1.2 per cent, HSBC gained 2.6 per cent and Royal Bank of Scotland rose 2.7 per cent.
Meanwhile, HBOS lost 6.2 per cent after the mortgage lender said 92 per cent of shareholders decided not to buy stock in its rights offering, leaving underwriters to try to sell 3.8 billion pounds of shares.
Oil and metals prices advanced setting the tone for mining and resource stocks.
Royal Dutch Shell, Europe's largest oil company, gained 0.6 per cent after crude rose from a six-week low in New York. BP edged 0.1 per cent higher.
Looking to the miners, Aussie majors BHP Billiton and Rio Tinto both gained 2.9 per cent, while Swiss based Xstrata rallied 1.6 per cent. Among others, Vedanta Resources added 3.8 per cent and Kazakhmys jumped 4.6 per cent.
Oil sensitive stocks such as British Airways and Rolls Royce lost 1.2 per cent and 2.1 per cent respectively.
European markets
Gains in financial firms lifted European stocks on Monday as investors cheered Bank of America's better than expected quarterly results. Meanwhile, declines in Roche offset some of the gains.
Germany’s DAX gained 42.19, or 0.66 per cent to 6424.84, while France’s CAC 40 rose 27.78, or 0.65 per cent to 4327.14.
Swiss drug maker Roche fell 4.8 per cent after it offered to acquire all outstanding shares in its US partner Genentech for US$43.7 billion.
Meanwhile, banks led the upward charge with Deutsche Bank advancing 2 per cent, ING adding 3.5 per cent and UBS gaining 2.2 per cent.
Sos Cuetara rose 0.5 per cent after the largest olive-oil bottler agreed to buy Unilever oil brands including market leaders Bertolli and Dante for 630 million euros. Unilever edged 0.3 per cent higher.
Japanese markets
Japanese financial markets were closed Monday due to a national holiday.
Hong Kongmarkets
Hong Kong shares saw strong gains on Monday, led by financial stocks on easing credit market worries. Steady oil prices and talk that the banks had suffered too harshly under US credit concerns pushed the market higher.
The Hang Seng Index closed up 658.71 points, or 3.01 per cent at 22,532.90.
HSBC Holdings jumped 4.1 per cent, boosted by a Sunday Telegraph report that said the lender had held talks with China's main sovereign investment fund, CIC, over a potential investment.
The mainland banks also performed strongly. ICBC gained 2.3 per cent and China Construction Bank jumped 2.6 per cent, while Bank of Communications and Bank of China added 2.7 per cent and 1.8 per cent respectively.
Other index heavyweights also made ground, with wireless carrier China Mobile jumping 2.2 per cent and top insurer China Life climbing 5.4 per cent.
Lower oil prices helped Sinopec Corp pick up 3.3 per cent and Air China climb 2.8 per cent.
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