Dow slips, but some analysts see positives

NEW YORK - Caution returned to Wall Street yesterday as investors gave back some gains from last week's rally even as they found encouragement from President-elect Barack Obama's calls for an economic stimulus package.

Yesterday was expected to be the first real test of Wall Street in 2009 because many traders were on vacation Friday, leading to light volume that might have exaggerated the market's move upward.

Prices fluctuated throughout the session, but some analysts found signs that the market's improvement from December was carrying over to the new year.

"There is some optimism out there that there is going to be a massive stimulus package by Obama that is going to get passed and that will help the economy," said Greg Church, chief investment officer of Church Capital Management.

The Dow closed down 81.80, or 0.91 percent, to 8,952.89. The Standard & Poor's 500 index fell 4.35, or 0.47 percent, to 927.45, and the Nasdaq composite index fell 4.18, or 0.26 percent, to 1,628.03.

The Russell 2000 index of smaller companies fell 0.81, or 0.16 percent, to 505.03.

On Friday, the Dow registered its first close above 9,000 in two months. Last week, all the major indexes gained more than 6 percent, furthering a rally off multiyear lows that began Nov. 20.

Light, sweet crude rose $2.47 to settle at $48.81 a barrel on the New York Mercantile Exchange.

Analysts expect Wall Street will remain on edge in the coming months as companies release their quarterly results and, more important, their forecasts for the year. Economists are expecting terrible profit reports and cautious forecasts, but anything worse than expected could rock the market.

Some stocks and sectors saw selling yesterday as analysts issued downbeat forecasts. JPMorgan Chase & Co. fell after a Deutsche Bank analyst late Sunday reduced his 2009 profit forecast for the company. He predicts JPMorgan will see increases in bad loans. The stock fell $2.10, or 6.7 percent, to $29.25 and was the steepest decliner among the 30 Dow components.

Another downgrade weighed on the telecommunications sector. Verizon Communications fell $2.16, or 6.2 percent, to $32.48, while AT&T Inc. fell 99 cents, or 3.4 percent, to $28.43. Both stocks are Dow components, and their declines steepened the average's drop.

Some energy stocks advanced as oil moved higher. El Paso Corp. rose 50 cents, or 6 percent, to $8.81, while XTO Energy Inc. rose $2.12, or 5.6 percent, to $39.70.