Stocks Tumble as Tensions Rise
Geopolitical jitters sent stocks reeling Friday as the market closed out another losing week en route to its third straight down year.
Investors shifted money into Treasury securities and gold as a rebel bombing in Chechnya left more than 40 people dead, adding to growing nervousness over the U.S. standoffs with both Iraq and North Korea. At the same time, the dollar continued its recent swoon as war worries soured investors on the greenback.
“Just look at the headlines: Iraq, North Korea, now Chechnya -- it’s the perfect international storm,” said Reg Gipson, president of Alpha Analytics Investment Group in Los Angeles.
On Wall Street, the Dow Jones industrial average fell 128.83 points, or 1.5%, to 8,303.78; the Standard & Poor’s 500 index sank 14.26 points, or 1.6%, to 875.40; and Nasdaq slipped 19.58 points, or 1.4%, to 1,348.31.
Trading was light at the end of the holiday-shortened week, but losers outnumbered winners by more than 2 to 1 on the New York Stock Exchange and by 5 to 4 on Nasdaq. It marked the third losing week in the last four for the major U.S. indexes, with the Dow sliding 2.4%, the S&P; 500 2.3% and Nasdaq 1.1%.
With two trading days left in 2002, the Dow is down 17.1% for year, the S&P; 23.8% and Nasdaq 30.9%. For both the blue-chip Dow and S&P; 500, this will be the first three-year losing streak since 1939-1941, and for the tech-heavy Nasdaq this will be the first in its 30-year history.
Although the key concerns for investors are the possibility of war in Iraq and reports that North Korea could be developing nuclear arms, other factors are weighing on stocks as well, said Chris Orndorff, head of equities at L.A.-based Payden & Rygel.
Some investors are selling stocks to capture losses that can be used to offset capital gains and income on their 2002 tax returns. “People certainly have a lot of beaten-down stocks to choose from,” Orndorff noted.
Meanwhile, mixed signals on the U.S. economy are offering little encouragement, he added.
While the government reported Friday that new home sales rose 5.7% in November, the surprisingly robust data were overshadowed by worries that the holiday shopping season has been disappointing for retailers.
Amazon.com dropped $1.44 to $18.86 -- bringing its three-day loss to 15% -- and Wal-Mart fell 60 cents to $49.16.
Gold, which is considered by many a haven during troubling times, rose 50 cents to a new 5 1/2-year high, settling at $349.20 an ounce. Precious metals mutual funds have been one of the few winning categories this year.
Oil rose to a two-year high, climbing 23 cents to $32.72 a barrel, as traders expressed concern that Venezuela would fail to make good on its pledge to revive its crude output, which has been sharply curtailed by the country’s ongoing general strike.
“Just because the government says they will get things up and running doesn’t mean it will happen,” Fimat USA broker Michael Fitzpatrick told Bloomberg News. Venezuela is seen as a crucial oil source if war disrupts Mideast supplies.
Chemical and plastics companies, which use oil as a raw material, slumped. Dow Chemical lost $1.09 to $29.11, and Hercules slid 51 cents to $8.67.
In the currency market, the dollar weakened against the euro and the Japanese yen in response to the rising fears of war. It slipped to 119.94 yen from 120.03 on Thursday, while the euro climbed to $1.04.
Among other highlights:
* Bond yields fell as investors in search of safety snapped up government debt. The yield on the benchmark 10-year Treasury note slipped to 3.81% from Thursday’s close of 3.9%.
* European indexes fell, including a 5.4% plunge in Germany, a 2.9% loss in Britain and a 2.3% drop in France.
* Financial stocks declined amid concern that the bear market will take a toll on earnings in the sector. Citigroup lost 85 cents to $35.17, Goldman Sachs sank $1.63 to $67.92 and J.P. Morgan Chase fell 65 cents to $23.80.
* El Segundo-based Unocal sank $1.53 to $30.12 after the oil company lowered its fourth-quarter outlook.
