Blue Chips Slide on Iraq Fears for 5th Straight Day
Blue-chip shares on Wednesday surrendered the last of their new year’s rally, as war worries helped drive Wall Street lower for a fifth day.
The trend can’t be comforting for investors who fear that the market could record its fourth down year in a row. That hasn’t happened since 1929-32.
The Dow Jones industrial average declined 124.17 points, or 1.5%, to 8,318.73, leaving the index down 0.3% since Dec. 31. The Dow had rallied nearly 501 points, or 6%, between year’s end and Jan. 14, before sliding anew.
The Standard & Poor’s 500 is down 0.2% for the year after falling 9.26 points, or 1%, to 878.36 on Wednesday.
The technology-dominated Nasdaq composite still is up 1.8% for the year, after easing 4.77 points, or 0.4%, to 1,359.48 on Wednesday. Nasdaq was up 9.4% as of Jan. 14.
Analysts said rising war rhetoric between President Bush and Iraqi leader Saddam Hussein, combined with some disappointing corporate earnings reports, are giving many investors all the excuse they need to pull back from stocks.
“There’s a lot of money that is spooked and is sitting on the sidelines now,” said Alfred Kugel, senior investment strategist at Stein Roe Investment Counsel in Chicago.
At the same time, many institutional investors, including Kugel, have the same longer-term view: They expect the market to surge once a war begins, assuming it goes well for the United States and its allies.
That would mirror stocks’ performance after the start of the Persian Gulf War in 1991. The Dow jumped 9% in the final three weeks of January that year, after the air war began.
For now, however, sellers are in control on Wall Street. On Wednesday, falling stocks outnumbered winners by 21 to 12 on the New York Stock Exchange and by 20 to 13 on Nasdaq. Trading was heavy.
Some downbeat earnings reports set a poor tone. Eastman Kodak slid $4.41 to $33.18 after the film giant said its quarterly operating profit was below expectations and that earnings this quarter also would fall short.
Defense contractor General Dynamics plunged $9.16 to $64.85 after forecasting weaker 2003 results because of troubles in its business-jet unit.
Some analysts say earnings reports overall have been reasonably good so far, but that investors have expected more optimistic outlooks from firms.
In the aftermath of last year’s corporate financial scandals, however, it shouldn’t surprise anyone if companies are cautious in assessing the near future, said Philip Orlando, chief investment officer at Value Line Asset Management in New York.
“What do we expect execs to say?” Orlando asked. It makes more sense for them to downplay their prospects than to risk being upbeat and wrong, he said.
The earnings news wasn’t all bad Wednesday. After regular trading ended, tech leaders Texas Instruments and Qualcomm, reporting fourth-quarter results, both raised their estimates for profit this quarter.
Orlando said investors may be waiting for two events to give them a better picture of what may happen with Iraq: On Monday, United Nations weapons inspectors report to the U.N. Security Council; on Tuesday, Bush gives his State of the Union speech to Congress.
In Wednesday’s trading:
Treasury bond yields fell as some investors fled stocks for bonds. The yield on the 10-year T-note dipped to a three-week low of 3.91% from 3.97% Tuesday.
Gold also gained at stocks’ expense. Near-term futures in New York rose $2.40 to a six-year high of $359.90 an ounce.
Brokerage stocks were hit hard after Merrill Lynch and E-Trade Group sounded wary about 2003 prospects. Merrill slid $1.83 to $38.25; E-Trade lost 36 cents to $4.46.
Market Roundup, C5-6
