Greenspan’s Views Drag Down Stocks
Stocks ended a discouraging week on a sour note Friday after a downbeat speech by Federal Reserve Chairman Alan Greenspan and several dismal corporate reports dimmed investors’ hopes for a quick economic turnaround. Bond yields fell on renewed hopes for another interest rate cut by the Fed.
“Maybe the economic rebound isn’t quite as strong as [investors] thought,” said Alan Day, an economist at Banknorth Investment Management Group.
The blue-chip Dow Jones industrial average closed below 10,000 for the first time since Dec. 20, falling 80.33 points, or 0.8%, to 9,987.53. The tech-laden Nasdaq composite index fell 24.78 points, or 1.2%, to 2,022.46. The broader Standard & Poor’s 500 index was down 10.95 points, or 1%, to 1,145.60.
Losers led winners by 3 to 2 on the New York Stock Exchange and by 4 to 3 on Nasdaq. Trading was moderate.
For the week, the Dow was down 2.7%, Nasdaq fell 1.8%, and the S&P; 500 dropped 2.3%--breaking a three-week winning streak.
Ford Motor, the world’s second-largest auto maker, heightened fears that rising unemployment will slam consumer spending when it announced it will close five plants and slash 35,000 jobs. The auto maker’s stock rose 21 cents to $15.50 on hopes the moves will raise profit.
Kmart tumbled 90 cents, or 21%, to $3.30 and was the most active issue on the NYSE. The company said it is in early talks with lenders about existing and supplemental financing after reporting weak holiday sales.
Shares of once-mighty energy trader Enron, which closed at 67 cents on Thursday, never traded Friday after the NYSE halted trading for pending news. UBS, Switzerland’s biggest bank, won the auction for Enron’s energy-trading unit. UBS rose 3 cents to $49.95.
Greenspan further darkened the mood on Wall Street when he said the recession-racked economy shows signs of stabilizing, but still faces significant risks, such as possibly higher unemployment and falling consumer spending.
Economic data have been offering hints of improvement, but corporate profits are still falling--by 22% in the fourth quarter from the quarter before, according to research firm Thomson Financial/ First Call--and investors worry that the recent rally has made stocks too expensive.
Earnings are not expected to turn positive until the second quarter, First Call said.
“It is still premature to conclude that the forces restraining economic activity here and abroad have abated enough to allow a steady recovery to take hold,” the Fed chief said to the Bay Area Council Conference, a group of local corporate executives.
In other economic news, U.S. wholesale prices fell in December for the third straight month, the government said in a report showing inflation was contained as the sluggish global economy kept imported energy prices down.
The absence of inflation and the prospect of another Fed rate cut were welcomed by bond traders. The yield on the benchmark 10-year Treasury note fell from 4.97% on Thursday to 4.86%--its lowest level since Dec. 4. The six-month T-bill fell to 1.60% from 1.73% on Thursday.
In other market news Friday:
* Oil services stocks continued their recent slide as crude prices dipped below $20 a barrel for the first time this year. The Philadelphia index of oil services companies fell 4%, with Schlumberger off $1.13 to $51.42 and Noble Drilling down $1.52 to $30.46. Oil fell 70 cents to $19.68 a barrel in New York trading.
* Cree dropped $7.05 to $23.60 after the maker of light-emitting diodes, or LEDs, used in automotive and cell phone displays, missed earnings expectations and gave a dim forecast for fiscal 2002 and 2003 growth.
* IGEN International rallied $4.06 to $42.15. A Maryland jury awarded it $505 million in total damages in its long-running legal dispute with Swiss pharmaceuticals group Roche Holding over the licensing of IGEN’s blood-testing technology.
