Stocks fell back from early gains Monday, as optimism triggered by the killing of Osama bin Laden was overtaken by concern that valuations have climbed too far.
The Dow Jones industrial average closed down 3.18 points, or 0.02%, at 12,807.36; the S&P 500 fell 2.39 points, or 0.18%, ending at 1,361.22; and the Nasdaq composite closed down 11.70 points, or 0.41%, at 2,861.84. All numbers are preliminary.
The S&P 500 has rallied more than 8% so far in 2011 as takeovers, higher-than-estimated profit and economic reports bolstered investors’ confidence. The gains in the S&P 500 pushed its valuation last week to 15.5 times the reported operating earnings of its companies, near the 2011 high of 15.8 reached in February.
The S&P 500 Total Return index, which measures the gauge’s performance including reinvested dividends, rallied for an eighth straight month in April to match its longest streak of gains since 1995.
Stocks started the session higher after Mr. bin Laden was killed Sunday by the U.S. military in a mansion outside Islamabad, Pakistan.
“You have a very complex situation” in the Middle East, said Russ Koesterich, head of investment strategy for scientific active equities at BlackRock. “It’s also not clear that bin Laden’s death is going to change the ongoing events” in that region. “We got a psychological lift, but it doesn’t change anything.”
A report showed that U.S. manufacturing cooled in April to a pace consistent with steady growth in the industry that’s leading the expansion. The Institute for Supply Management’s manufacturing index fell to 60.4 last month from 61.2 in March. Figures greater than 50 signal expansion.
Energy shares slumped 0.7%, the biggest decline in the S&P 500 within 10 industries.