Sell-Off Blamed on Early Signs of Kerry Lead
Wall Street was hit by a late sell-off Tuesday as traders apparently reacted to reports of election exit poll results trumpeted on the Internet.
The markets finished trading hours before the first polls closed, with no winner in sight. Even so, some Wall Street professionals blamed the decline of the Dow Jones industrial average on sketchy, unconfirmed reports suggesting that Democratic Sen. John F. Kerry was leading President Bush in key battleground states.
“It looks like Kerry is doing better than expected, and that caused a sell-off,” said Brian Pears, head of equity trading at Victory Capital Management, which oversees $46 billion in investments.
Others said the prospect of a close contest -- and a possible repeat of the court battle that ended the 2000 election -- was the main culprit.
“The worst thing that could happen is a contested election because you’ll see this bull run we’ve had over the past five or six days dissipate,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. “If somebody can declare victory, then this bull run could extend right through to the end of the year.”
The Dow Jones industrial average closed down 18.66 points, or 0.2%, at 10,035.73, after rising more than 70 points earlier in the day. The Dow ended a five-day streak of gains that had added 303.93 points, or 3.1%, to the index since Oct. 26.
The Standard & Poor’s 500 index was essentially flat, up 0.03 point to 1,130.54. The Nasdaq composite index gained 4.92 points, or 0.2%, to 1,984.79.
The focus on election results kept investors from enjoying another drop in oil prices, which took the price of crude below the $50-a-barrel mark for the first time in a month. A barrel of light crude for December delivery closed at $49.62, down 51 cents, in New York trading.
Bond yields fell. Treasury traders also pointed to reports on blogs -- Web logs that are a mixture of news and gossip -- suggesting that exit polls showed Kerry ahead. Bond yields decline as their prices rise.
“Kerry’s platform of higher taxes and cutting spending, which in turn may slow the economy,” is good for bonds and bad for stocks, said Mark Macqueen, who helps manage $3.5 billion in bonds and stocks at Sage Advisory Services Ltd. in Austin, Texas. “The bond market is doing the logical thing” in pushing yields lower, he said.
The yield on the benchmark 10-year note slipped to 4.05% from 4.08% on Monday.
In other markets highlights:
* Defense stocks declined on speculation of a Kerry victory, with the S&P; 500 aerospace and defense index off 1.28%. The biggest decliners included General Dynamics, down $1.86 to $100.48, and Lockheed Martin, down $1.68 to $54.11.
* An S&P; index of drug makers dropped 1.1%, with some analysts saying it reflected concerns that a Kerry win would allow health plans to negotiate lower prices with drug companies. Pfizer, the world’s biggest drug maker, fell 10 cents to $28.70, and Merck lost $1.48 to $26.80.
* BMC Software slumped $2.32 to $17.02 for the steepest drop in the S&P; 500. The maker of software to manage corporate networks said fiscal second-quarter maintenance revenue missed its forecast. Revenue from repairs accounts for more than half of the company’s sales.
* International Game Technology, the world’s biggest slot- machine maker by revenue, jumped $1.80 to $34.89. Its 5.4% climb made it the S&P; 500’s best performer. The company said it had a fiscal fourth-quarter profit excluding some items of 35 cents a share, beating the Thomson First Call estimate by 2 cents.
* Emerson Electric gained $1.25 to $65.53 as the diversified manufacturer saw its net income jump 28%, beating Wall Street profit forecasts.
* National Semiconductor lowered its profit forecasts for the current quarter, citing sluggish sales and high inventories. The stock fell 29 cents to $16.40.
* Clorox fell $1.38 to $53.77 after reporting that first-quarter earnings fell 5% because of one-time charges stemming from a restructuring effort. The company still beat analysts’ expectations by 3 cents a share.
* Insurance stocks were mixed as Merrill Lynch downgraded Aon and Willis Group Holdings in response to New York Atty. Gen. Eliot Spitzer’s investigations of the two companies. Aon lost 19 cents to $20.46, and Willis added 4 cents to $36.
