Economic Worries Put Wall Street in Reverse
Investors’ sense that the war in Iraq is winding down helped fuel a powerful advance on Wall Street early Monday.
But concerns about how the U.S. economy, too, is winding down spurred an afternoon sell-off that took back nearly all of the day’s winnings.
The session was disappointing for market bulls, who had expected that the generally positive weekend news out of Iraq would lure many more investors into stocks.
It did -- but not for long. The Dow Jones industrial average was up 243 points early in the day. But prices drifted lower for the rest of the session, and the Dow ended with a gain of just 23.26 points, or 0.3%, at 8,300.41.
The sharp reversal raised fears that some investors who have driven the market higher since mid-March, anticipating a quick U.S. victory in Iraq, now are looking to take profits and exit as victory seems imminent.
“I guess it was, ‘Buy on the cannons, sell on the trumpets,’ ” said Dan McMahon, trader at brokerage CIBC World Markets in New York.
The Dow is up 10.3% since March 11, though its recent peak was 8,521.97 on March 21.
If the market’s daily moves now depend less on war headlines, investors will spend more time focusing on the U.S. economy’s fundamentals, analysts say. And on that front, the picture has been increasingly discouraging.
Most of the recent economic reports have been worse than expected, said Todd Clark, a trader at Wells Fargo Securities in San Francisco.
On Friday, for example, the government said the economy lost a net 108,000 jobs in March, three times what analysts had anticipated.
That raised new worries that the economy could fall back into recession, devastating corporate earnings and pulling the rug out from under stock prices.
Already, 582 companies have warned that first-quarter earnings will fall short of analysts’ estimates, according to data-tracker Thomson First Call.
That is up 28% from the 454 firms that had warned about first-quarter results at this time a year ago, Thomson said.
But some market bulls said they doubt that most investors would flee stocks just because new reports confirm what most people had expected: that the economy weakened in the first quarter as companies and consumers delayed spending amid the war’s approach.
“The war created a lot of issues for businesses and consumers,” said Carl Domino, chairman of Northern Trust Value Investors in West Palm Beach, Fla. But as war fears ebb, he expects spending to pick up, helped by lower oil prices.
Crude oil futures in New York fell Monday for the fourth time in five sessions, with the May contract losing 66 cents to $27.96 a barrel, the lowest price since March 21.
Oil declined even though the Organization of the Petroleum Exporting Countries said it would meet to discuss possible production cuts.
Other major stock indexes saw their early gains melt away with the Dow’s decline Monday. The Nasdaq composite index, up as much as 3.4%, closed with a gain of 6 points, or 0.4%, at 1,389.51.
Some analysts said the market was stalled in part by technical issues. The Standard & Poor’s 500 index briefly crossed the 900 mark, a level at which it has struggled since November, CIBC’s McMahon said. Traders who study chart patterns may have sold at that point, figuring another pullback was likely, he said. The S&P; ended at 879.93, up 1.08 points, or 0.1%.
An East Coast snowstorm also may have affected trading by keeping many investors away from the market, analysts said.
Despite the day’s turnaround, rising stocks outnumbered falling issues by 20 to 13 on the New York Stock Exchange and by 19 to 12 on Nasdaq. Volume was active.
Among the day’s highlights:
Foreign markets surged and mostly held on to their gains. The German market jumped 5.8%, the Japanese market added 2.2% and the Mexican market rallied 1.6%.
The Treasury bond market moved in lock step with Wall Street. Yields initially soared as money shifted from bonds to stocks. The 10-year T-note yield rose as high as 4.07%. But yields came down as stocks faded. The 10-year T-note ended at 3.98%, up from 3.95% on Friday.
Gold prices continued to decline, with the near-term futures contract in New York ending at a four-month low of $321.50 an ounce, down $3.80. Gold’s appeal as a haven has declined as the war has progressed.
Battered airline stocks benefited from the drop in oil. Delta Air Lines rose 58 cents to $10.60, American Airlines parent AMR gained 33 cents to $4.28 and JetBlue jumped $1.09 to $29.40.
In the tech sector, Intel added 30 cents to $17.35, but Cisco Systems was off 14 cents to $13.57.
Among Dow stocks, 3M reached a record high of $136.75 during the session, though it closed off $1.42 at $132.56.
At the other end of the spectrum, AT&T; hit a new multiyear low, losing 29 cents to $14.86.
Market Roundup, C8-9
