Stocks Tumble on War, Economy Fears
War worries and a sobering report on the U.S. economy spurred another stock sell-off Monday, knocking the Dow index below 8,000 for the first time since the fighting in Iraq began.
Treasury yields fell and gold and oil prices rose as traders continued to position themselves more defensively.
“The media spin on the Iraq war was quite negative this past weekend,” said Erik Gustafson, senior portfolio manager at Columbia Management Group in Chicago. “Many media groups were depicting the war as a failure after only 12 days, and the market reacted strongly.”
On Wall Street, the Dow Jones industrial average fell 153.64 points, or 1.9%, to 7,992.13; the broader Standard & Poor’s 500 index slid 15.32 points, or 1.8%, to 848.18; and the tech-heavy Nasdaq composite lost 28.43 points, or 2.1%, to 1,341.17.
Losers beat winners by 3 to 2 on the New York Stock Exchange and Nasdaq. Volume was modest, but above recent levels.
In other markets, the yield on the benchmark 10-year T-note sank to 3.80% from 3.90% on Friday. Gold rose $4.40 an ounce to $335.90, while oil climbed 88 cents to $31.04. The dollar lost ground against the yen and the euro.
Analysts said the day’s economic news helped fuel fears that a so-called double-dip recession is becoming more likely.
The Purchasing Management Assn. of Chicago’s business activity index sank to 48.4 in March from 54.9 in February, a weaker-than-expected reading indicating economic contraction in the heartland. The Institute for Supply Management’s survey on U.S. manufacturing, being released today, also is expected to show shrinking activity.
“With Iraq moving into everyone’s radar screen, businesses are becoming even more cautious,” said Gary Schlossberg, senior economist at Wells Capital Management in San Francisco.
Schlossberg said higher oil prices caused by the war could further erode consumer and business confidence. He said the odds still favor the economy avoiding recession but warned, “the risk is increasing.”
According to Bloomberg News, more than 20 U.S. and European companies have lowered sales or profit forecasts since the Iraq war began, citing weak consumer spending. The companies include Hilton Hotels, Ethan Allen Interiors and New York Times.
Although stocks often rally at the end of a quarter, Gustafson said fears of protracted war and a return to U.S. recession were “too overwhelming” this time.
“Typically, professional investors are buying as the quarter ends because they want to show that they owned the right stocks,” he said. “But these days, it’s all about the war.”
Among big stocks Monday, Altria Group slid $2.17 to $29.96. Its Philip Morris unit said it can’t post a $12-billion court-ordered bond to appeal an Illinois tobacco verdict, raising the specter of bankruptcy if the requirement is not lowered. Other tobacco stocks also were lit up -- the Amex index of nine tobacco stocks fell 2% to a 52-week low.
In the tech sector, IBM lost $2.42 to $78.43, Texas Instruments fell $1.01 to $16.07 and Intel dropped 94 cents to $16.28.
In other highlights:
* Foreign markets offered no haven. In Japan, the Nikkei-225 lost 3.7%, and in Europe, leading indexes fell 4.2% in France, 3.9% in Germany and 2.6% in Britain.
* Retailers hurt the U.S. market. Nordstrom lost $1.12 to $16.20 after issuing a first-quarter profit warning, and Wal-Mart Stores fell $1.10 to $52.03 after warning that its March sales will be at the low end of estimates.
* Bucking the downtrend, Performance Food Group rose 81 cents to $30.66 after A.G. Edwards raised its rating on the wholesaler to “buy” from “hold.”
Market Roundup, C8-9
