Stocks Fall to 3-Month Lows on War Worries
Blue-chip stocks fell to three-month lows Friday as war worries drove more investors to the sidelines -- or into traditional “safe havens” such as gold and Treasury bonds.
The Dow Jones industrial average slid 238.46 points, or 2.9%, to 8,131.01, bringing the loss for the week to 5.3%. It was the biggest weekly drop since July and left the index at its lowest since Oct. 16. The technology-dominated Nasdaq composite index took a harder spill than the Dow on Friday, losing 46.13 points, or 3.3%, to 1,342.14. But the tech sector had held up surprisingly well in recent days, and Nasdaq still is up 0.5% year to date.
Market pros said the barrage of news expected next week on the U.S.-Iraq showdown and the economy pushed some investors to sell Friday rather than risk being blindsided.
United Nations weapons inspectors are to report to the U.N. Security Council on Monday regarding what they found in Iraq. On Tuesday, President Bush will give his State of the Union speech. The Federal Reserve meets Tuesday and Wednesday, and on Thursday the government will give its initial estimate of economic growth in the fourth quarter.
“It’s a natural human response to say, ‘I’ll wait to see what happens,’ ” said Philip Ferguson, a money manager at the AIM mutual funds in Houston.
Investors’ nervousness has been compounded in recent days by some downbeat 2003 business forecasts from major companies, including Microsoft, Eastman Kodak and Merrill Lynch.
After a sharp gain in the first two weeks of the year, Wall Street has turned increasingly pessimistic since Jan. 14. The Dow has lost 711 points, or 8%, since then, amid surging Washington-Baghdad war rhetoric.
Many institutional investors say they expect a war between the United States and Iraq to be over quickly, and in favor of the U.S., fueling a strong market rebound. But until a conflict begins the appetite for stocks may continue to wane, some say.
Falling shares outnumbered winners by about 3 to 1 on both the New York Stock Exchange and Nasdaq on Friday. But trading volume declined from Thursday’s levels, when the market mounted a modest rally for the first time in a week.
Friday’s drop in volume was an indication that the market’s problem now is more a lack of demand for stocks than a surge in selling, said Dan McMahon, a trader at CIBC World Markets in New York. He views that as a relatively positive sign.
Fourth-quarter corporate earnings reports have mostly shown growth from a year ago: More than 70% of the companies in the Standard & Poor’s 500 index that have reported results so far have posted higher profit, according to Thomson First Call.
Still, investors were hoping executives would be more upbeat about 2003. Some tech firms, including Texas Instruments and Qualcomm, have raised their estimates for earnings this quarter. But conservative outlooks have been more common, adding to investors’ gloom, said Leo Grohowski, investment chief at Deutsche Asset Management in New York.
Among Friday’s highlights:
All 30 stocks in the Dow ended lower. J.P. Morgan Chase fell $1.32 to $23.81 and Microsoft slumped $2.43 to $49.85.
Gold zoomed to a six-year high, with near-term futures adding $3.70 to $368.40 an ounce in New York. Crude oil futures jumped $1.03 to $33.28 a barrel.
Treasury bond yields ended slightly lower, with the 10-year T-note at 3.93%. It has fallen from 4.18% on Jan. 9.
The euro hit a three-year high against the dollar, ending at $1.084, as global investors continued to favor assets denominated in currencies other than the dollar because of war fears.
Insurance stocks were hammered after Morgan Stanley downgraded American International Group and other firms, citing disappointing prospects. AIG dropped $4.89 to $56.04.
Utility stocks slid after CMS Energy suspended its dividend because of financial woes. The stock slumped $2.47 to $6.07. Also, American Electric Power lost $1.24 to $25.65 after saying it probably will cut its dividend 40% to strengthen its finances.
Market Roundup, C4-5
