Stock Market Continues Slide
The stock market’s slide deepened on Monday, pushing the Dow index closer to the 10,000 mark as worried investors continued to pull away from equities.
Treasury bonds and gold again benefited from Wall Street’s jitters.
The Dow Jones industrial average sank 121.85 points, or 1.2%, to 10,064.75, its lowest level since mid-December. The blue-chip index has fallen 672 points, or 6.3%, since reaching a 32-month high Feb. 11.
Broader indexes suffered steeper declines Monday. The technology-dominated Nasdaq composite index tumbled 30.57 points, or 1.6%, to 1,909.90. It has lost 11.3% since reaching a multiyear high Jan. 26.
Most foreign markets also were down sharply.
Israel’s assassination of the founder of the Palestinian militant group Hamas was a catalyst for the latest slump in stocks, analysts said. But in a market that has been struggling for more than five weeks, there is no shortage of reasons for selling.
“There are a lot of factors for concerned investors to latch onto,” said Jack Ablin, chief investment officer at Harris Trust & Savings Bank in Chicago.
Questions about the U.S. economy’s strength have been weighing on equities since late January. The terrorist bombings in Madrid on March 11 added to investors’ fears. And last week, crude oil prices hit 13-year highs.
Many Wall Street pros say the market was overdue for a sell-off after last year’s powerful rebound, and that the losses may feel worse only because investors became so used to steadily rising prices.
So far, the declines in most stock indexes from their recent highs are between 5% and 15% -- a range that would constitute a normal “correction” within a bull market, meaning a temporary pullback.
The Dow still is up 34% from its low for 2003, reached last March. The Nasdaq index is up 50% in the same period.
But stock markets worldwide may be nearing crucial tests of their resilience, some experts say. A drop through the 10,000 level on the Dow, for example, could raise new concerns about the staying power of last year’s rally.
President Bush’s slide in opinion polls also is a potential problem, some say.
“The stock market doesn’t like it when the incumbent has problems,” said Steve Todd, editor of the Todd Market Forecast newsletter in Mission Viejo.
If Bush were defeated in the Nov. 2 election, it could threaten the tax cuts that were widely cheered by Wall Street.
The market’s biggest test may come when first-quarter corporate earnings reports begin to make headlines in a few weeks, said Jason Trennert, chief market strategist at research firm ISI Group in New York.
Those reports generally are expected to be strong and show that many companies are selling more goods or services while keeping a tight rein on expenses.
So far in March, 461 companies have provided preview forecasts of their first-quarter results, according to Reuters Research. Of that total, 25% have raised their outlooks while 15% have warned of disappointment. The rest expected to meet analysts’ forecasts.
When the actual numbers begin to flow out in April, “I would start to get worried [about the market] ... if it goes down in the face of better-than-expected earnings,” Trennert said.
But better-than-expected results from cruise line operator Carnival on Monday didn’t boost its shares. They fell 54 cents to $41.97. And Wal-Mart Stores lost 50 cents to $58.10 even though the company said March sales should be at the high end of its forecasts.
Some analysts who believe stocks are entering another long-term decline say the market is beginning to signal that the economy is likely to weaken later this year. Although first-quarter earnings may be robust, investors always look ahead -- and they may be figuring that the first quarter will be as good as it gets, said John McGinley, editor of the Technical Trends market newsletter in Wilton, Conn.
“I think we’re headed for a double-dip [recession],” he said. “The market always discounts that at least six months early.”
But many market pros say it’s too early to give up on stocks.
“I figured a correction was coming,” said Harris Trust’s Ablin. “I’m willing to look past this valley.”
Among Monday’s highlights:
* Falling stocks outnumbered rising issues by more than 3 to 1 on the New York Stock Exchange and on Nasdaq.
* Indexes of smaller stocks fell more sharply than big-stock indexes, continuing the trend of recent sessions. The blue-chip Standard & Poor’s 500 dropped 1.3%; the S&P; index of small stocks fell 1.8%.
* In Europe, the German market slid 2.4%, the British market lost 2% and the Spanish market slumped 1.9%.
In Taiwan, the chief index plunged 6.7% after the incumbent president was reelected by a thin margin and protesters demanded a recount.
* Oil prices fell as Reuters and Bloomberg News reported that some OPEC officials said the cartel might rethink production cuts planned for April. Near-term oil futures in New York lost 97 cents to $37.11 a barrel.
But prices of soybeans, wheat and corn surged, driving a Reuters index of 17 major commodities up 0.8% to a 23-year high.
Also in commodities trading, gold rose as some investors sought safety on worries about the Mideast. Near-term gold futures in New York gained $4.90 to $417.40 an ounce, a two-month high.
* Treasury bonds also benefited from the stock market’s slide, as investors looked for safer alternatives for their money. The 10-year Treasury note yield dipped to 3.71% from 3.77% on Friday as investors pushed bond prices higher.
Market Roundup, C8
