Economic Data Trip Up Wall Street
A spate of bad news about the economy, including sluggish productivity growth and disappointing retail sales, hit Wall Street hard Thursday and sent stocks falling sharply.
The sell-off more than offset the market’s advance Wednesday, which skeptical analysts had attributed to bargain hunters, not investors ready to commit to stocks.
“Everyone is definitely looking at the data on the economy, and they really want to see some glimmers of hope that we are going to get a pickup in profit growth. Without that happening so far, people are a little skittish,” said Joseph Keating, chief investment officer at AmSouth Asset Management in Birmingham, Ala.
The geopolitical backdrop also weighed on investors. Worries about a possible U.S. attack on Iraq rose as the rhetoric from the United States and the Arab world heated up, and violence in Afghanistan and a thwarted car bombing in Israel added to the day’s jitters.
Technology stocks were among the hardest hit. The Nasdaq composite index closed at its lowest level in a month, down 41.31 points, or 3.2%, at 1,251. The Nasdaq 100, more concentrated in tech issues, slid 4.1% as 93 of its 100 members lost ground.
The Dow Jones industrials fell 141.42 points, or 1.7%, to 8,283.70, after losing as many as 208 points early in the day, and the Standard & Poor’s 500 index dropped 14.25 points, or 1.6%, to 879.15.
Losers outnumbered winners by more than 2 to 1 on Nasdaq and the New York Stock Exchange. Trading was weak, as it has been for more than two weeks.
Investors were bracing for a mid-quarter update from Intel. The chip maker fell $1 to $15.11 in the regular session, as apprehension about future earnings grew ahead of its update, due after the bell.
After the close, Intel reported that revenue probably would come in slightly below the midrange of its previous estimates. Intel’s stock regained some of the lost ground in after-hours trading.
Analysts said investors also are nervous about the possibility of a war with Iraq and the anniversary of the Sept. 11 terrorist attacks.
“I hate to use 9-11 as an excuse, but I think there is genuine apprehension and grief going into it,” said Scott Bleier, president of Hybridinvestors.com.
Among the disappointing economic news Thursday was a report that productivity of U.S. companies grew in the second quarter at its slowest pace of the year. In another report, new claims for unemployment benefits fell last week, but still were at a level that indicates a soft labor market.
The Institute for Supply Management also had disappointing news, saying its non-manufacturing index for August stood at 50.9, below the 54 reading analysts were anticipating. And the Commerce Department reported that orders to U.S. factories rose less than expected in July.
“Everyone is looking to see that there is some traction taking place in the economy. And the data just continue to say we are not accelerating,” Keating said.
Treasury yields fell for a fourth session, remaining at depths not seen in four decades. The yield on the benchmark 10-year Treasury note slid to 3.93%, from 3.96% on Wednesday.
Gold rose $3.30 to $318.20 an ounce. Oil gained 71 cents to $28.98 a barrel in New York on worries of Mideast turmoil and news that the U.S. crude stockpile fell.
In other highlights:
* Retailers were among Thursday’s losers, falling on disappointing August same-store sales, those at stores open at least one year. Abercrombie & Fitch dropped $1.91 to $21.86 on a 3% decrease in same-store sales. May Department Stores, which say same-store sales decline 8.6%, fell $1.14 to $27.61.
* Procter & Gamble emerged as a bright spot, rising $1.29 to $89.85. The Dow component raised its earnings forecast for the fourth straight quarter.
* Financial stocks took a dive as Congress widened its probe of Wall Street. Goldman Sachs fell $2.61 to $72.89, and Citigroup lost $1 to $29.30.
* Stocks in Japan rallied 1.6% after seven straight losing sessions. However, the benchmark Nikkei index was lower in early trading today.
* Railroad stocks were derailed. Burlington Northern Santa Fe lost $1.59 to $26.90, Union Pacific fell $2.43 to $58.51 and CSX tumbled $5.60 to 29.03.
