War-Wary Wall Street Slumps on Weak Manufacturing Data
March got off to a sour start on Wall Street Monday as a lackluster reading on U.S. manufacturing and continuing fears of war quashed a short-lived bout of enthusiasm over the arrest of an Al Qaeda leader and Iraq’s move to scrap banned missiles.
An early rally fizzled after a closely watched report from the Institute of Supply Management showed the manufacturing sector grew at an unexpectedly sluggish pace in February. The data revived worries over the economic outlook against the murky geopolitical backdrop.
“Reality has set in that this economy needs a lot more fodder and much more catalyst than positive news like the capture of [a] terrorist,” said Weston Boone, vice president of listed trading at Legg Mason Wood Walker. “You can’t ignore the fundamentals of the economy if this bear market is going to turn around.”
The Dow Jones industrial average ended down 53.22 points, or 0.7%, at 7,837.86. The Standard & Poor’s 500 index lost 6.34 points, or 0.8%, at 834.81. The technology-laced Nasdaq composite index dropped 17.23 points, or 1.3%, to 1,320.29.
Winners and losers were about even on the New York Stock Exchange in light trading. Decliners led advancers by 4 to 3 on Nasdaq.
Wall Street on Friday closed out its third straight down month, and many investors were hoping March would get off to a good start toward breaking that losing streak.
The market had climbed more than 1% early in the day after the weekend capture of Khalid Shaikh Mohammed, suspected mastermind of the Sept. 11 attacks, and after Iraq’s decision to destroy some of its missiles and account for stockpiles of biological warfare agents.
Red-hot oil prices eased on the news, slipping 72 cents to $35.88 a barrel on the New York Mercantile Exchange. But traders said they thought President Bush eventually would order an attack on Iraq. Stocks extended losses after a U.S. official said North Korean MiG jet fighters approached a U.S. spy plane in international airspace over the weekend.
“What came out this weekend was positive, with catching the terrorist, Saddam destroying missiles, oil coming down -- but Bush hasn’t changed his stance,” said Todd Leone, head of listed trading at S.G. Cowen. “All of a sudden, then you throw in North Korea.”
Negative comments from investor Warren Buffett and the news that the chief financial officer of credit-card issuer Capital One Financial resigned after receiving notice that regulators may charge him with insider trading also weighed on stocks.
Gold prices dipped $1 to $349.20 an ounce as traders speculated that a U.S. assault on Iraq may be delayed. Gold futures are off about 8% from their early February highs.
Treasury yields, meanwhile, fell on the tepid economic news. The yield on the benchmark 10-year Treasury note slipped to 3.68% from Friday’s close of 3.69%. And the dollar fell against the euro and the yen.
In other highlights:
* GM, the world’s largest automaker, fell 61 cents to $33.16 and weighed on the Dow. The company said its U.S. vehicle sales fell about 19% in February as high incentives failed to jump-start demand amid war fears, high unemployment and falling consumer sentiment.
* Royal Gold, which acquires and manages precious-metal royalty interests, tumbled $6.35, or 33%, to $13.10. Shares appear overvalued as they trade at 65 times earnings and 30 times trailing sales, financial newspaper Barron’s reported.
* Symantec, a maker of computer-security software, climbed $1.48 to $41.95. UBS Warburg recommended that investors buy shares after an 18% decline last week.
* CenterPoint Energy, a Texas utility that has gotten a loan from Buffett’s Berkshire Hathaway, surged $1.15 to $5.80. The company extended the term of a $3.85-billion credit line to June 2005 and eliminates $1.2 billion in payments that would have been due this year.
Market Roundup, C9-10
