NEW YORK – Wall Street began a holiday-shortened week cautiously Monday, as stocks fell in light trading while investors reacted to a bleak outlook from Toyota Motor Corp. and disappointing earnings from drugstore operator Walgreen Co.
Toyota and Walgreen provided more evidence of companies' struggles amid a sharp drop around the world in demand for all types of products. Walgreen's profit fell 10 percent in its fiscal first quarter, short of Wall Street expectations, due to the costs of opening more than 200 new stores. The company said it will slow down its expansion because of the recession.
Toyota, meanwhile, slashed its earnings forecast for a second time, warning that it now expects to report an operating loss for the fiscal year through March. It would be the Japanese automaker's first such loss since it began reporting results in 1941.
The announcement underscores the challenges that remain for car companies, whose growth has been halted by the weak economy. Toyota's American rivals, General Motors Corp. and Chrysler LLC, received a $17.4 billion lifeline from the federal government on Friday, in a move to stave off a major bankruptcy.
While investors cheered the government's pledge to provide assistance to the ailing automakers, they are wary about whether the aid will be enough to turn around the companies. The financing hinges on strict conditions that must be quickly met; GM and Chrysler must prove viability, defined as positive cash flow and the ability to pay back government loans, by March 31. Ford Motor Co. is not asking for short-term assistance.
Analysts warned, however, that trading volumes were very low this week, so stock movements are probably not indicative of the market's long-term direction.
"A truncated week is going to make it tough to generate any firm takeaways from trading," said Craig Peckham, equity trading strategist at Jefferies & Co. "I would expect to see sleepy volumes and a lot of people protecting positions going into year end."
In early trading, the Dow Jones industrial average fell 46.60, or 0.54 percent, to 8,532.51, after moving in and out of positive territory.
Broader stock indicators dipped. The Standard & Poor's 500 index fell 9.87, or 1.11 percent, to 878.01, and the Nasdaq composite index fell 23.12, or 1.48 percent, to 1,541.20.
The Russell 2000 index of smaller companies fell 10.04, or 2.06 percent, to 476.22.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 160.08 million shares.
Walgreen shares fell $1.41, or 5.4 percent, to $24.67.
Toyota's U.S.-traded shares fell $1.89, or 2.9 percent, to $62.49.
Wall Street has shown some signs of relative stability in the last few weeks. Since reaching multiyear lows on Nov. 20, the Dow is up 13.6 percent and the S&P 500 is up 18 percent.
Besides relief over the auto bailout, investor sentiment has also grown a bit more upbeat in the past few trading sessions after the Federal Reserve cut the benchmark federal funds rate to a range of zero to 0.25 percent. Investors are looking for any signs that the government is being proactive about reviving the economy.
After doling out hundreds of billions of dollars in aid this year to prop up the troubled auto and financial sectors, the government continues to be tapped by companies for assistance. Some of the country's largest property developers are seeking government help as the threat of default on commercial properties is growing, according to a Wall Street Journal report on Monday.
Another recipient of the government's assistance, American International Group Inc., meanwhile, is selling its Hartford Steam Boiler unit to reinsurer Munich Re AG for $742 million as it works to shed assets to pay back a government loan. AIG received a $150 billion rescue package from the government last month to help it pull through the credit crisis.
Bond prices were mixed early Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.13 percent from 2.21 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.03 percent from zero late Friday.
Light, sweet crude rose 52 cents to $42.88 a barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold prices rose.
Overseas, Japan's Nikkei stock average rose 1.57 percent, while Hong Kong's Hang Seng index dropped 3.34 percent. In afternoon trading, Britain's FTSE 100 was down 1.16 percent, Germany's DAX index was down 0.58 percent, and France's CAC-40 was down 1.37 percent.