Iraq Worries Drag Down Stocks
Major stock indexes slumped Wednesday, dragged down by worries about escalating violence in Iraq and disappointing corporate earnings reports.
U.S. Marines bombed a mosque compound in the town of Fallouja, killing as many as 40 insurgent Iraqis, witnesses said. More than 300 U.S. soldiers have been killed in action since President Bush declared an end to major combat operations in Iraq on May 1.
“People may think we are getting into a quagmire” in Iraq, said Richardson Merriman, chief executive of Pennsylvania Trust in Radnor, Pa. “It lowers confidence, and our economy might be affected along with corporate profits.”
Alcoa and Seagate Technology reported results that missed Wall Street forecasts, raising concern that first-quarter earnings won’t increase enough to extend the stock market’s rally.
The benchmark Standard & Poor’s 500 index has jumped 42% from its prewar low of March 11, 2003, amid encouragement over the health of the economy.
In Wednesday’s trading, the Dow Jones industrial average sank 90.66 points, or 0.9%, to 10,480.15.
Broader indexes took more modest losses: The S&P; 500 shed 7.63 points, or 0.7%, to 1,140.53, and the Nasdaq composite index slid 9.66 points, or 0.5%, to 2,050.24.
Despite the declines, winners and losers were nearly evenly matched on the New York Stock Exchange and on Nasdaq.
With many people away for the Passover and Easter holidays and no trading scheduled for Good Friday, volume was light, exaggerating some of the price moves.
Although Yahoo reported surprisingly strong results after the close of trading, Dow member Alcoa was a major disappointment, especially given the run-up in raw aluminum prices.
“When companies come out and miss, it makes you test your thesis,” portfolio manager Sunil Reddy of Fifth Third Bank in Cincinnati told Bloomberg News.
Alcoa fell $1.85 to $34.65.
Seagate Technology, the world’s biggest disk-drive maker, came in shy of forecasts it already had guided downward. Its stock fell 61 cents to $14.98.
Investors will get more clues about the corporate profit picture today when General Electric reports its results. Analysts predict members of the S&P; 500 will boost profits by an average of 17.1% in the first quarter from a year earlier, up from their Jan. 1 estimate of 13.4% growth, Thomson Financial said.
Yahoo lost 42 cents to $48.35 and GE fell 12 cents to $31.40 in advance of their profit reports.
In other trading, crude oil futures surged after the Energy Department said U.S. inventories unexpectedly fell for the first week in eight. Oil rallied to $36.15 a barrel from $34.97 on Tuesday.
Gold futures bounced from a two-week low as the dollar fell against the euro, boosting the appeal of precious metals as a haven. Gold rose to $422.80 an ounce from $418.90.
The euro edged up against the dollar, but the yen fell slightly against the greenback.
Treasury securities were little changed, with the yield on the benchmark 10-year T-note sticking at 4.15%.
In other highlights:
* Wal-Mart Stores fell $1.04 to $57.98 after voters rejected the company’s plan to build a retail complex in Inglewood.
* Dave & Buster’s climbed $2.11 to $17.06, after the chain of restaurants that feature video games for adults said profit in its latest quarter nearly doubled to 46 cents a share from a year earlier, beating analysts’ estimate.
* Taser International rallied for a second day, gaining $5.79 to $98.04 after saying its stun guns were not to blame in the deaths of 40 people in police custody. CBS News had described the deaths as Taser-related, but company CEO Rick Smith said most of the victims died of drug overdoses.
* Wild Oats Markets surged $1.28 to $14.70 after a Smith Barney analyst upgraded the stock to “buy” from “hold,” saying the natural-foods chain will benefit from the recent supermarket strike in California.
Market Roundup, C5
