Renewed Jitters Dampen Stocks
Stocks lost ground Tuesday after an audiotape allegedly from militant leader Osama bin Laden reignited investor jitters that war with Iraq was drawing near.
Also weighing on sentiment was Federal Reserve Chairman Alan Greenspan’s cautious outlook on the economy. Greenspan, in testimony before a Senate committee, said uncertainties created by possible war with Iraq posed “formidable barriers” to business spending and clouded the economic outlook.
But Wall Street’s focus was on Bin Laden, the fugitive Saudi-born militant blamed by Washington for masterminding the Sept. 11 terrorist attacks.
“Greenspan is being overlooked by this Bin Laden tape.... It’s gotten everyone on edge again,” said Peter Boockvar, equity strategist at Miller Tabak & Co.
The blue-chip Dow Jones industrial average fell 77 points, or 1%, to 7,843.11, and the broader Standard & Poor’s 500 index shed 6.77 points, or 0.8%, to 829.20.
The tech-laden Nasdaq composite index closed down 1.22 points, or 0.1%, to 1,295.46.
Losers led winners 3 to 2 on the New York Stock Exchange and about 6 to 5 on Nasdaq in moderate trading.
It was the fifth losing session in the last six for the Dow and S&P; 500, which are coming off their fourth straight down week and are off almost 6% since the start of the year.
Stocks, which were up earlier in the session, took a turn for the worse after the tape said to be from Bin Laden warned Arab states against backing any U.S.-led war on Iraq and said suicide attacks were important in fighting America.
Al Jazeera satellite television channel in Qatar broadcast the statement, which also urged Muslim solidarity with Iraq. Secretary of State Colin L. Powell said the message suggests Iraq is linked to global terrorism.
“If that’s the case, then war is inevitable,” said Anthony Iuliano, head trader for Glenmede Trust Co., referring to Powell’s comments.
Powell’s remarks, combined with Iraq’s rejection of the presence of United Nations peacekeepers, helped drive oil prices to a two-year high. Near-month crude futures jumped 96 cents to $35.44 a barrel in New York.
But gold lost ground again, falling $1.20 to $362.50 an ounce in New York.
In the bond market Treasury yields rose initially, reflecting weak demand as the government auctioned $24 billion of five-year notes at a yield of 3.02%. But yields fell later in the day as war fears drove more investors into the relative safety of government bonds.
In other highlights:
* One of the biggest drags on the Dow was SBC Communications, which fell 79 cents to $23.71 a day after the No. 2 U.S. telephone company was being pummeled by talk that it may be interested in buying Hughes Electronics’ DirecTV unit.
* Semiconductor shares helped bolster Nasdaq after Texas Instruments, the top maker of chips for cell phones, reaffirmed that it expects first-quarter earnings of about 6 cents a share. TI rose 39 cents to $15.44. Among other chip issues, Xilinx rose 70 cents to $19.62, Motorola added 12 cents to $8.15 and Intel rose 7 cents to $15.34.
* Among new stock issues, Bancshares of Florida closed at $10.19, up slightly from its initial public offering price of $10 on Monday. The deal was the first IPO so far in 2003.
After trading ended, insurance firm Infinity Property & Casualty priced its IPO at $16 a share. The stock will begin trading today on Nasdaq.
But San Diego-based mortgage lender Accredited Home Lenders Holding, which had been expected to price its IPO on Tuesday, instead postponed the deal until later in the week. Sources said the deal price may be cut as low as $8 a share. The company had hoped to price its shares as high as $11.
* Yum Brands, owners of the Taco Bell, Pizza Hut and KFC fast food chains, said its earnings rose 5%, helped by acquisitions, a lower tax rate and higher sales. It rose $1.37 to $23.80.
* Interstate Bakeries plunged $3.42 to $10.22 after the company slashed its profit outlook, citing weak sales of Hostess Twinkies and other snack foods.
* European stock markets rallied sharply, but that was before the Bin Laden tape was released. The Dutch market jumped 3.5% and the French market gained 2.5%.
Market Roundup, C6-7
