Stocks Fall Again on Terror Alert
A growing fear of terrorism cast a pall on Wall Street on Tuesday, sending stocks sharply lower for a second day. The market’s uneasiness wiped out early gains prompted by better-than-expected retail earnings and a settlement between Merrill Lynch and the New York attorney general.
Analysts said the pullback, although expected after last week’s big rally, widened late in the trading day after the FBI warned New York law enforcement officials of an uncorroborated threat of terrorism involving such landmarks as the Statue of Liberty and the Brooklyn Bridge.
“It’s more of the geopolitical fears,” said Arthur Hogan, chief market analyst at Jefferies & Co. “Most of the corporate news is positive. The retail stores beat expectations, and so the consumer is still in the market. But there’s a lot of rhetoric about the next terrorism attack. When it will be, and where?”
The technology sector registered the biggest drop, having enjoyed the biggest surge last week. The Nasdaq composite index fell 37.41 points, or 2.2%, to 1,664.18.
The market’s other major indexes also slid. The Dow Jones industrial average fell 123.79 points, or 1.2%, to 10,105.71, and the Standard & Poor’s 500 index sank 12 points, or 1.1%, to 1,079.88. Losers led winners by almost 2 to 1 on Nasdaq and the New York Stock Exchange. Trading was light but ahead of Monday’s slow pace.
The major indexes have now shed half of last week’s gains. On Monday, stocks fell after the FBI said suicide bombings in the United States were inevitable and Vice President Dick Cheney on Sunday warned that terrorism threats should be taken seriously.
In addition to Tuesday’s fresh FBI warnings of possible terror attacks in New York, new reports of mail laced with anthrax--this time at the International Monetary Fund--were a worry but not a major catalyst in the day’s declines, traders said.
“The mounting anxiety of terror attacks and the uneven economic recovery have been responsible for a rather-be-safe-than-sorry mode,” said Alan Ackerman, executive vice president of Fahnestock & Co.
Bond yields fell for a second day as investors continued to seek safety in government securities. The yield on the benchmark 10-year Treasury note slipped to 5.15% from 5.20% on Monday.
The dollar, meanwhile, fell to another five-month low against the surging yen amid signs of an economic upturn in Japan.
Crude oil dropped $1 to $27.33 a barrel in New York.
Among the day’s highlights:
* Merrill Lynch rose 47 cents to $43.85 after settling charges by New York Atty. Gen. Eliot Spitzer that it misled investors with its stock ratings to garner lucrative investment banking fees. But Merrill couldn’t hold on to early-day gains of more than $2 a share, and its competitors lost ground, with Goldman Sachs falling $1.04 to $79.20 and Morgan Stanley declining 96 cents to $48.39.
* Retailing shares fell, despite a string of better-than-expected first-quarter earnings that included those of Home Depot and Target. Dow member Home Depot sank $3.60, or 7.4%, to $44.90. Analysts expressed disappointment that the firm didn’t raise its 2002 profit forecast. Target fell $1.16 to $41.54.
* Technology gave back some gains from last week when good news, such as better-than-expected earnings from Applied Materials and Dell Computer, prompted buying. Applied Materials fell 47cents to $26.31, and Dell, which also issued an upbeat outlook last week, lost 35 cents to $26.88.
IBM fell $1 to $83.45, having last week rallied on promises to cut costs. Microsoft dropped $1.82 to $52.19 after announcing it would spend $2 billion over five years in an effort to boost sales of its Xbox video game console.
* Silver hit a 19-month high, up 6.5 cents to $4.83 an ounce in New York. The gain came on signs of strengthening industrial demand and as gold continues to advance.
Market Roundup, C9-10
