Stocks fluctuate on disappointing earnings

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NEW YORK -- Stocks fluctuated Monday as investors grappled with concerns about the health of corporate profits after U.S. bank Wachovia Corp. and Dutch conglomerate Royal Philips Electronics NV posted disappointing quarterly results.

Wachovia surprised investors by posting a first-quarter loss of $393 million and cut its quarterly dividend by 41% to 37.5 cents. The bank, which analysts had expected to post a profit, also said it plans to raise $7 billion through a stock offering.

And in a sign that the slumping U.S. economy is hurting companies overseas, Royal Philips Electronics reported a sharp drop in first-quarter profits as a decrease in television sales in North America offset growth in its health care and lighting industries.

The reports preceded the Commerce Department's reading on March retail sales, which showed a modest 0.2% rise following February's 0.6% decline. The March figure bested the flat reading analysts had predicted. Excluding a 1.1% rise at gasoline service stations, retail sales would have been flat last month -- and possibly negative when adjusted for inflation.

"We obviously came out with more bad financial news," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, referring to the Wachovia report. "The flip side is we had retail sales come in a little better than expected. It seems like they kind of negated each other."

In midday trading, the Dow Jones industrial average fell 12.21, or 0.10%, to 12,313.21.

Broader stock indicators declined. The Standard & Poor's 500 index fell 3.42, or 0.26%, to 1,329.41, and the technology-heavy Nasdaq composite index fell 8.50, or 0.37%, to 2,281.34.

Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 409.9 million shares.

Bond prices edged lower. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.49% from 3.48% late Friday.

Investors sold off shares of financials, led by Wachovia, which fell $2.75, or 10%, to $25.06.

Detrick noted that the Wachovia news compounded investors' concerns about the banking sector following a report Friday from General Electric Co. GE, seen as a bellwether of big business, said its financial services business was challenged in the first quarter by the slowing U.S. economy and difficult capital markets. The conglomerate's disappointing first-quarter sent the major indexes down by more than 2% Friday.

"This is just more bad news for financials. It just confirms that the financials are by no means out of the woods yet," Detrick said of Wachovia.

He contends many investors are holding off any major moves ahead of corporate results and economic figures on inflation due later in the week.

"Today just seems like just a break from the massive selling we saw Friday. We want more confirmation from companies reporting earnings this week if indeed earnings are going to weak or if the first inning was just a bad start to the game," he said in reference to the early first-quarter results.

In dealmaking news, Blockbuster Inc. said it is taking an unsolicited $1 billion-plus bid for Circuit City Stores Inc. directly to shareholders. Blockbuster said the consumer electronics chain has dragged out a deal that has been under negotiations for months. Circuit City jumped $1.15, or 30%, to $5.05, while Blockbuster fell 36 cents, or 11.5%, to $2.77.

Meanwhile, Northwest Airlines Corp. pilots have threatened to oppose a combination with Delta Air Lines Inc., but officials were nonetheless mobilizing to announce a deal to create the world's biggest airline as early as Tuesday -- provided the boards of the two companies give final approval to the deal, people familiar with the talks said Sunday. Northwest rose 6 cents to $11.01, while Delta advanced 24 cents, or 2.4%, to $10.25.

Light, sweet crude rose $1.25 to $111.39 a barrel on the New York Mercantile Exchange.

Gold prices turned higher, and the dollar was mixed against other major currencies.

The Russell 2000 index of smaller companies rose 0.23, or 0.03%, to 688.39.

Overseas, Japan's Nikkei stock average fell 3.05%. In afternoon trading, Britain's FTSE 100 fell 1.08%, Germany's DAX index fell 0.74%, and France's CAC-40 fell 0.66%.
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