The broader U.S. stock market fell on Monday on worries that troubles in the subprime mortgage market may spread, but optimism about earnings at multinational companies pushed the Dow to nearly 14,000.
Energy stocks fell, led by ConocoPhillips, because of concern about dwindling profit margins for gasoline. In addition, natural gas prices declined due to forecasts for below-normal summer temperatures, hurting utility stocks.
But the Dow rose, lifted by large manufacturers United Technologies Corp. and Caterpillar Inc., both of which hit lifetime highs on optimism about their upcoming earnings.
It has been a bad day for the stock market, with exception of large caps, said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Minneapolis.
Large caps, particularly multinationals, will likely post better-than-expected earnings because of foreign exposure. But the fact the broader stock market is going down, I think, is indicative partly of people being worried about subprime.
The Dow Jones industrial average was up 43.73 points, or 0.31 percent, at 13,950.98. The Standard & Poor's 500 Index was down 2.98 points, or 0.19 percent, at 1,549.52. The Nasdaq Composite Index was down 9.67 points, or 0.36 percent, at 2,697.33.
During the session the S&P, which on Friday had set a lifetime high, touched a new intraday high of 1,555.90, and the Dow touched a record high of 13,989.11.
While there was no specific news behind it, the ABX subprime mortgage indexes, used by investors to hedge subprime mortgage risks, tumbled to record lows. The Dow Jones Home Construction Index dropped 1.3 percent.
Moody's Investors Service downgraded its outlook on luxury home builder Toll Brothers Inc., citing concerns over the company's housing inventory and saying its cash flow will be sharply negative in fiscal 2007.
Adding to worries about the impact of subprime problems on the profit outlook, Sanford C. Bernstein cut its forecast for Bear Stearns Cos. Inc.'s (BSC.N: Quote, Profile, Research) 2007 and 2008 earnings, citing the investment bank's recent hedge fund bailout. Bear Stearns shares fell 1.7 percent to $140.43.
Shares of Verizon Communications Inc. gained after a Financial Times blog said Vodafone Group was considering a $160 billion takeover bid for its U.S. wireless joint venture partner. Vodafone denied the report, but Verizon shares rose 2.4 percent to $42.76.
In other M&A news, IHOP Corp., the operator of pancake restaurants, proposed to buy casual-dining chain Applebee's International Inc. in a $2.1 billion deal. Applebee's shares rose 2.2 percent to $24.91 on the Nasdaq; IHOP shares were up 9.1 percent to $61.24.
Helping prompt enthusiasm about earnings prospects for industrial companies were stronger-than-expected quarterly earnings from Eaton Corp., a diversified manufacturer whose businesses range from electrical power distribution to engine parts.
Caterpillar's shares rose 0.9 percent to $85.90, after earlier reaching a lifetime high of $86.49. United Technology gained 2.2 percent to $76.67, and marked a lifetime high of $76.98. Eaton shares were up 2.8 percent to $100.87.
The CBOE oil index fell 1.6 percent, led by a 3.4 percent drop in ConocoPhillips, whose shares had surged more than 20 percent since late June. The S&P utilities fell 1.4 percent.
Trading was light on the NYSE, with about 1.36 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.75 billion shares traded, below last year's daily average of 2.02 billion.
Declining stocks outnumbered advancing ones by a ratio of about 2 to 1 on the NYSE and on Nasdaq.