Stocks Slump on New Attack Fears
Stocks slumped Monday as jitters about possible new terrorist attacks on the United States and a drop in a key gauge of economic activity sent investors scampering out of a market that last week racked up its biggest gain of the year.
Stocks started off on a bad note after Vice President Dick Cheney said Sunday that an attack on the nation was “almost certain” amid signs that the Al Qaeda network may be planning another strike.
“Clearly, Cheney’s comments are scaring investors, especially coming off of an 8% up week for Nasdaq,” said Seth Tobias, a trader and fund manager at Circle T Partners.
A bigger-than-expected decline in the U.S. index of leading economic indicators added to worries by hinting at a tepid economic recovery.
The Dow Jones industrial average slid 123.58 points, or 1.2%, to 10,229.50. The broader Standard & Poor’s 500 index was down 14.71 points, or 1.3%, at 1,091.88. The technology-laden Nasdaq composite index was down 39.80 points, or 2.3%, at 1,701.59.
Losers exceeded winners by a ratio of 5 to 3 on the New York Stock Exchange and almost 2 to 1 on Nasdaq in light trading.
The Dow climbed 4.2% last week, giving the blue-chip gauge its best week since September. Nasdaq surged 8.8%, its biggest weekly gain in 13 months.
The rally left investors primed to take profits when the Conference Board reported that leading indicators fell 0.4% in April after inching up 0.1% in March.
“The biggest concern is the economy,” said Marc Klee, co- manager of the John Hancock Technology Fund.
But in the short term, Wall Street cited fears of another terror attack as a reason to sell. A new attack on the United States is almost certain as U.S. intelligence officials picked up signals that a fresh Al Qaeda strike could be in the works, Cheney said.
The FBI also warned of a possible plot by the Al Qaeda network to detonate bombs in U.S. apartment buildings. Investors are worried that more assaults could hurt consumer sentiment and the economy and spark a sharp sell-off such as the one after the Sept. 11 attacks.
“When people are told the likelihood of another terrorist attack is higher, it makes them nervous,” Klee said.
The market’s losses were spread across a wide array of sectors. Among tech companies, Broadcom declined $1.03 to $26.27, and Dell Computer stumbled 72 cents to $27.23. Among blue chips, American Express fell 89 cents to $43.30, 3M fell $1.83 to $128.24, and GE lost 85 cents to $32.60.
Gainers included retailer Lowe’s, climbing $2.04 to $46.80 on first-quarter earnings that surpassed analysts’ expectations by 8 cents a share.
Gold stocks benefited from worries about the prospect of more attacks, as investors jumping into so-called safe havens pushed gold up $5.10 to $315.70 an ounce.
The Amex index of gold mining stocks jumped more than 10% to a high unseen since October 1997.
Bond yields slipped on the weak economic news. The yield on the benchmark 10-year Treasury note dipped to 5.20% from 5.25% on Friday. The dollar continued its recent slide against the euro and the yen.
Oil inched up 15 cents to $28.33 a barrel in New York, even though Norway said it would end oil production limits June 30. Russia announced similar plans Friday. Tighter crude supplies have helped boost prices 41% this year.
In other market news:
* Utilities were the day’s best-performing sector as Duke Energy advanced 83 cents to $34.35 and energy trader Dynegy gained $1.58, or 23%, to $8.60.
* PeopleSoft fell $1.85 to $21.84 after saying it still sees no discernible pickup in customer spending. After the market closed, regulators charged Ernst & Young with compromising the independence of its audits of PeopleSoft by entering a business venture with the software company. PeopleSoft fell to $21.16 in after-hours trading.
Other software stocks also fell, among them business software maker Oracle, which lost 45 cents to $9.11, and Microsoft, which slumped $2.02 to $54.01.
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Market Roundup, C9-10
