Dow Ends Down for 3rd Day; Nasdaq, S&P; Gain Ground
A spate of mostly bad news Friday--ranging from an earnings warning from Honeywell International to falling consumer confidence--sent the Dow industrials lower for a third day. Tech stocks advanced, but the market’s three major indexes still posted a third straight weekly loss.
Analysts said investors remained worried about a war with Iraq as well as the strength of the economic recovery. A government report showing strong retail sales helped lessen the anxiety but was not enough to outweigh the day’s other bad news.
“It’s a combination of poor earnings, some uncertainty about [terrorism] and a little more evidence that consumers don’t seem to be as confident,” said Robert Harrington, co-head of listed block trading at UBS Warburg.
“That could mean more softness in the economy.”
The Dow Jones industrial average fell 66.72 points, or 0.8%, to close at 8,312.69. That came after a 2.4% decline Thursday and a 0.3% dip Wednesday, the anniversary of the Sept. 11 attacks.
The broader market finished higher for the day. The tech-laden Nasdaq composite index gained 11.72 points, or 0.9%, to 1,291.40, having fallen 2.7% in the previous session. The Standard & Poor’s 500 index rose 2.90 points, or 0.3%, to 889.81, after a drop of 2.5% on Thursday.
Winners edged losers by about 5 to 4 on Nasdaq and the New York Stock Exchange. Volume, though up from recent sessions, remained muted.
The three major market gauges posted their third straight weekly decline for the first time since the period ended June 21. For the week, the Dow lost 1.4%, Nasdaq declined 0.3% and the S&P; fell 0.5%.
Analysts said terrorism remained a concern for investors. In south Florida, three people in two cars were detained and a cross-state highway was shut down after a woman reported hearing the men talk about going to Miami and “bringing it down.” Authorities later blasted open what appeared to be a backpack from one of the vehicles.
Meanwhile, the University of Michigan on Friday said consumer sentiment in September fell to 86.2 from the previous month’s figure of 87.6. Analysts were expecting a higher reading of 87.0.
But the Commerce Department reported that retail sales rose 0.8% in August, driven largely by a big jump in auto sales. The solid showing caught analysts by surprise.
The Labor Department also said its producer price index, which measures inflation pressures before they reach the consumer, was unchanged in August, compared with a 0.2% drop in July. The lack of inflation pressures has been a main reason the Federal Reserve has been able to leave interest rates at a 40-year low.
“The overall economy is just not hitting the numbers,” said Charles Pradilla, chief investment strategist at SG Cowen Securities. After weeks of declines, “the market has a higher risk premium, so it just can’t tolerate the bad news,” he said.
Earnings warnings also dragged down stocks.
Dow member Honeywell fell $4.78, or 17%, to $23.56 after the diversified manufacturer lowered its third-quarter outlook. The announcement pressured other manufacturing companies, including United Technologies, which declined $3.10 to $58, and General Electric, which fell 95 cents to $27.05.
Airline stocks tumbled after analysts widened their loss estimates for the group. American Airlines parent AMR fell $1.53 to $7.36, a low not seen since 1988. Delta Air Lines slipped 99 cents to $14.97 and Continental Airlines lost 36 cents to $8.55.
Lucent Technologies dropped 39 cents to $1.26 after the telecommunications company said it expects weak fourth-quarter revenue because of soft consumer spending. ESS Technology, a Fremont, Calif.-based chip maker, fell $3.55, or 32%, to $7.68 after saying fourth-quarter profit will fall short of estimates. Rival Microchip Technology fell $1.70 to $16.95 and Zoran was off $1.74 to $11.50.
But tech issues got a boost from Adobe Systems, which rose $2.32 to $20.77 after meeting lowered third-quarter earnings expectations and reporting that its finances should remain stable in the months ahead.
Yields on Treasury securities fell on the consumer confidence report, although the dollar strengthened against the euro and the yen. Gold prices dipped while oil prices recouped Thursday’s losses as tensions over Iraq escalated.
Market Roundup, C4-5
