US stocks fell on Monday as poor earnings clouded the outlook for profits and investors worried that Friday's rally may have been overdone despite a warning sign of inflationary pressure.
Gains in crude oil hurt airline shares on Monday, while cosmetics company Avon Products Inc and Tyson Foods Inc reported weaker-than-expected profit, sending shares lower.
Some investors realised gains after stocks surged on Friday on data that showed a weaker-than-expected rise in second-quarter gross domestic product, which supported the view that the Federal Reserve might pause in raising interest rates. But a trader said the market paid little attention to core personal consumption expenditures, a gauge of inflation, which accelerated, according to the GDP report.
"On Friday, the majority of people were looking at overall economic growth figures, but there was also concerning inflationary data which did not get as much focus," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. "Lots of market participants feel it is just as important, which is why you're not having signs of follow-through today."
The Dow Jones industrial average was down 26.02 points, or 0.23 percent, at 11,193.68. The Standard & Poor's 500 Index was down 2.62 points, or 0.20 percent, at 1,275.93. The Nasdaq Composite Index was down 7.36 points, or 0.35 percent, at 2,086.78.
Avon, the world's largest direct seller of cosmetics, said second-quarter profit plunged 54 percent due to job cuts and other restructuring moves. Avon shares plunged more than 10 percent to $29.51 on the NYSE. Tyson Foods Inc reported a worse-than-forecast loss, sending shares of the poultry and beef producer down 2.3 percent to $14.24 on the NYSE.
In the Middle East, Israel rejected pressure to end its war against Hizbollah and launched a new incursion into Lebanon. Crude oil rose 51 cents on the New York Mercantile Exchange to $73.70 a barrel. Shares of airlines, large consumers of fuel, fell sharply. Continental Airlines fell 5.7 percent to $26.84 and AMR Corp, the operator of American Airlines, lost 4.2 percent to $22.27 on the NYSE.
Meanwhile, shares of oil field services company Schlumberger were up 3 percent to $67.21 and integrated oil company ConocoPhillips' stock gained 1 percent to $68.62. Another commodity stock on the rise was Phelps Dodge Corp, up 8 percent to $88.01 on the NYSE. The copper miner was trading higher after Canada's Teck Cominco Ltd sweetened its offer for base metals producer Inco Ltd.