Markets Drop as Investors Wait
Wall Street took a respite Monday after two weeks of volatile trading, with key indexes finishing slightly lower as investors absorbed an unsurprising manufacturing-sector report and awaited a Federal Reserve meeting today on interest rates.
Analysts attributed the muted reaction to investors’ acceptance that the economy will stay weak for a while, as well as their hesitance to make any big moves until more is known about the U.S. response to the Sept. 11 terrorist attacks.
“What the market is reacting to is a growing sense that this is going to be a long haul. The terrorism campaign will take a long time and our lives are going to be altered to a great degree and not in a way that is bullish,” said Charles Pradilla, chief strategist at SG Cowen Securities.
The Dow Jones industrial average closed down 10.73 points, or 0.1%, at 8,836.83, giving back a bit of Friday’s 166-point gain and the index’s 611-point rebound last week.
Broader stock indicators also fell. The Standard & Poor’s 500 index dropped 2.39 points, or 0.2%, to 1,038.55, and the Nasdaq composite index lost 18.34 points, or 1.2%, closing at 1,480.46.
It was Nasdaq’s eighth decline in 11 trading sessions. The tech-laden index, which was down almost 3% at one point Monday, has lost 13% since Sept. 11.
Monday marked an inauspicious start to the fourth quarter. Friday ended the worst three-month period for U.S. stock markets since the end of 1987. Nasdaq led major indexes lower, with a 30.7% third-quarter decline.
Investors showed little concern Monday over new National Assn. of Purchasing Management data that indicated manufacturing activity continues to suffer.
Although the association found that the manufacturing sector contracted in September for the 14th consecutive month, the results were slightly better than expected. The index reading of 47 was above the 45 most analysts had predicted, but it still fell below 50. Any reading below 50 indicates that manufacturing activity is shrinking rather than growing.
“If economic data is more or less in the consensus, as this was, it’s not going to affect the market significantly,” said Pradilla.
Tech stocks recorded the most notable losses Monday, reflecting investors’ ongoing doubts that the already fragile sector will recover any time soon. Hewlett-Packard fell 45 cents to $15.60, while Intel dropped 38 cents to $20.01.
After the market’s regular session, Compaq Computer warned its third-quarter results would be lower than expected because of the deteriorating economy. The stock fell 8% to $7.66 in extended-hours trading after closing at $8.33, up 2 cents, in regular trading.
Blue chips closed mixed. ExxonMobil declined 31 cents to $39.09, while manufacturer 3M dropped $1.54 to $96.86. But financial stocks fared better, including Citigroup, which rose $1.25 to $41.75.
Trading has been turbulent for weeks. Stocks dropped precipitously when trading resumed after the attacks, but even before then the market was losing ground on worries that a business turnaround might not occur before 2002.
Although stocks rebounded last week, many analysts expect continued weakness as investors take short-term profits and shy away from any big commitments. Third-quarter corporate earnings reports, due out this month, are expected to add to volatility.
Even the likelihood of the ninth interest rate cut of the year at today’s Federal Reserve meeting is expected to do little to cheer Wall Street. Instead, investors are more likely to focus on what the Fed says about the economy’s current health and future prospects.
Also Monday, the Commerce Department reported consumer spending increased by 0.2% in August, slightly below analyst expectations. The data predate the terrorist attacks, but are still viewed as a harbinger of what might come in the months ahead. Consumer spending accounts for two-thirds of the economy and many fear that consumers, scared by the attacks and worried about the future, will spend less.
“Obviously you’d expect to see spending taper off dramatically following Sept. 11,” said Todd Clark, trader at WR Hambrecht. “This is going to make people think the trends are already worse.”
Declining issues led advancers 3-2 on the New York Stock Exchange and by almost 2-1 on Nasdaq. Trading was busy, but below the heavy pace of the last two weeks.
Bond yields generally fell on expectations of further rate cuts. The yield on the benchmark 10-year Treasury note fell to 4.54% from 4.59% on Friday.
Oil prices fell for the first time in four sessions, slipping 15 cents a barrel to $23.28 in New York Mercantile Exchange trading.
The dollar rose to a three-week high against the yen, but slipped against the euro.
Stocks were weaker in Europe. Germany’s DAX index lost 1.6%, Britain’s FTSE-100 dropped 2.4% and France’s CAC-40 fell 1.8%.
Market Roundup: C8, C9
