Stocks Sink on GDP Report, Earnings News
A weak economic report for the fourth quarter, a new U.S. warning to Iraq and some downbeat corporate earnings reports helped send Wall Street back into a funk Thursday, driving stocks broadly lower.
The Dow Jones industrial average fell to a three-month low of 7,945.13, down 165.58 points, or 2%, for the day. It was the lowest close since Oct. 14.
The Nasdaq composite index slumped 35.71 points, or 2.6%, to 1,322.35, the lowest since Nov. 11.
Falling stocks outnumbered rising issues by more than 2 to 1 on the New York Stock Exchange and Nasdaq in active trading.
The market started the day with a modest rally, building on its rebound of Tuesday and Wednesday. But sellers quickly took control Thursday.
The government’s report that gross domestic product grew at an anemic annualized rate of 0.7% in the fourth quarter wasn’t a surprise, but it underlined the weakened state of the economy, analysts said.
A major fear hammering stocks since Jan. 14 has been that a war between the United States and Iraq could tip the economy back in recession.
“That’s at the top of the anxiety list for investors,” said David Sowerby, chief market analyst at Loomis, Sayles & Co. in Detroit.
President Bush said Thursday that Iraq has “weeks, not months” to dismantle its chemical, biological and nuclear weapons program.
On the earnings front, AOL Time Warner’s report late Wednesday of a $99-billion loss for 2002, including huge write-offs, appeared to shock some investors. AOL shares plunged $1.96 to $12 in heavy trading on the NYSE. The stock’s closing low last year was $9.64, reached in July.
“This is a mess with AOL and a reminder there’s too much debt and capacity in certain sectors,” Robert Streed, a money manager with Northern Trust, told Bloomberg News.
Dow Chemical fell $1.10 to $28 after posting a large quarterly loss that it blamed in part on rising raw material costs.
Despite the soft economy, prices of many commodities have continued to surge during the last few months. The CRB/Reuters index of 17 key commodity futures prices rose Thursday to its highest level since 1997.
Near-term crude oil futures in New York added 22 cents to $33.85 a barrel. Near-term gold futures rose $2.30 to $368.60 an ounce, though that was below the six-year high of $370 reached Tuesday.
Treasury bonds again attracted nervous investors, sending yields lower.
Many big investors see no chance of the stock market staging a significant rebound until after the Iraq issue is resolved.
“Investors are going to wait and see,” said Mark Whiston, chief executive of mutual fund firm Janus Capital Group. “The problems in the Middle East are a massive overhang.”
Among Thursday’s highlights:
* Losers in the Dow included Coca-Cola, which slid $1.35 to $39.20; DuPont, down $1.52 to $37.21; General Motors, down $1.37 to $35.91; and Citigroup, off $1.15 to $34.20.
* Big-name tech shares were sharply lower. IBM fell $2.02 to $78.30, Microsoft sank $1.67 to $48.24, and KLA Tencor was down $2.10 to $33.75.
* Stocks trading lower on fourth-quarter earnings reports included Gillette, down 60 cents to $29.50, and oil company Amerada Hess, which tumbled $7.88 to $48.40.
* Fleetwood Enterprises, a Riverside-based maker of manufactured homes and recreational vehicles, plunged $1.96 to $5.05. The company said that it had a wider-than-expected loss in the quarter ended Sunday and that it may not be profitable this quarter. Fleetwood didn’t provide profit estimates.
* On the plus side, auto parts retailer AutoZone rose $3.16 to $64.36 after saying it expects profit in the current quarter to beat Wall Street’s forecasts.
* Biotech firm MedImmune jumped $1.96 to $29.86 after saying it expects to win federal approval to sell the first U.S. nasal-spray flu vaccine by July.
* European markets mostly rallied, with Britain’s main index up 2.7% and Spain’s up 1.3%. The euro, which had been surging against the dollar in recent weeks, eased slightly.
Market Roundup, C6-7
