Stocks fall slightly as caution heading into earnings offsets corporate dealmaking

Stocks fall slightly ahead of earnings season

NEW YORK — Stocks fell slightly Monday as caution heading into earnings season offset upbeat signs from a fresh round of corporate dealmaking.

The Dow Jones industrial average fell 17 points. The modest dip comes after the Dow posted its best week since July 2009.

In deal news, insurance broker Aon Corp. said it will buy human resources company Hewitt Associates for $4.9 billion in cash and stock, and Playboy Enterprises Inc. founder Hugh Hefner offered to take the media company private. Also Avon Products Inc. agreed to buy Silpada Designs for $650 million in a bid to expand its jewelry business.

Investors see acquisitions as a sign that companies are confident in their business outlook and willing to spend cash to expand.

The deals come as companies prepare to announce quarterly results. Aluminum producer Alcoa Inc. becomes the first major company to report results later Monday after the stock market closes.

Shares of Alcoa and other materials stocks slipped. A drop in commodities imports in China, particularly copper, hurt shares of companies like Freeport McMoran Copper & Gold Inc.

Until last week, stocks had been sliding on signs that the economy was not growing nearly as fast as investors had hoped. Earnings reports over the next few weeks will provide insight into whether sluggish retail sales, waning consumer confidence and high unemployment have actually hurt corporate profits.

“We will have some good news” during earnings season, predicted Steve Stahler, president of the Stahler Group in Baton Rouge, La. “But it will be harder to find it.”

Investors will also want to see how upbeat executives are in their outlooks for the coming quarters. Increased optimism would likely give the market a boost. It could also be a sign that companies will increase their hiring.

Greg Estes, fund manager at Intrepid Capital Funds in Jacksonville Beach, Fla., said investors will be keenly focused on the outlooks companies issue along with their earnings reports.

“People are really wanting to see things get better,” Estes said. Estes said some industries like technology were more likely to expect improvement versus those that rely more on consumer spending.

In midday trading, the Dow Jones industrial average fell 16.88, or 0.2 percent, to 10,181.07. The Standard & Poor’s 500 index fell 3.98, or 0.4 percent, to 1,073.98, while the Nasdaq composite index fell 7.81, or 0.4 percent, to 2,188.64.

About three stocks fell for every one those that rose on the New York Stock Exchange, where volume came to 293.6 million shares, compared with 298.8 million at the same time Friday.

Even though the market just had its biggest weekly gains in a year, some analysts are unsure about how long the rebound will last. Trading volume remains light, which means many investors are still sitting on the sidelines, and the Dow is still down 9 percent from its 2010 high reached in late April.

Economic news this week should shed some light about how well the recovery is going. In addition to earnings reports, readings are also due on retail sales, weekly jobless claims, manufacturing activity, consumer sentiment and inflation.

Hewitt shares jumped $11.19, or 31.6 percent, to $46.59. Aon shares fell $3.15, or 8.2 percent, to $35.19.

Playboy jumped $1.37, or 34.8 percent, to $5.31. Avon dipped a penny to $28.26 after having risen earlier in the day.

Alcoa shares fell 21 cents, or 2 percent, to $10.73. Freeport McMoran fell $2.75, or 4.2 percent, to $63.23.

Bond prices traded in a tight range. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 3.03 percent from 3.06 percent late Friday.

The Russell 2000 index of smaller companies fell 9.75, or 1.6 percent, to 619.68.

Overseas, Britain’s FTSE 100 rose 1.1 percent, Germany’s DAX index gained 0.1 percent, and France’s CAC-40 rose 0.4 percent. Japan’s Nikkei stock average dipped 0.4 percent after the ruling party lost elections Sunday.