Stocks Slide Again Amid Rate Concerns
Stocks fell again Wednesday, sending the Dow Jones industrial average to its longest losing streak since July 2002, amid concern that the Federal Reserve may step up the pace of interest rate increases.
Airline stocks led the retreat after Delta Air Lines slashed fares by as much as 50%.
Investors also continued to cash out of some of the stock sectors that were the best performers last year, including small-company issues, real estate investment trusts and heavy- industry shares.
After sinking Monday and Tuesday, blue-chip indexes were in positive territory for much of the day. But sellers took over in the final two hours of trading.
The Dow index declined for a sixth session, losing 32.95 points, or 0.3%, to 10,597.83.
The broader S&P; 500 fell 4.31 points, or 0.4%, to 1,183.74, the lowest since Dec. 8.
Losses in the Dow were limited by insurance giant American International Group, which added $1.10 to $67.35 after raising its quarterly dividend by 67% to 12.5 cents a share.
Blue chips in general held up better than the rest of the market. The technology-heavy Nasdaq composite slid 16.62 points, or 0.8%, to 2,091.24.
Nasdaq has lost 84.20 points, or 3.9%, in the last three days, giving up almost half of last year’s 172-point gain.
By contrast, the Dow is down 1.7% this year.
Falling stocks outnumbered winners by more than 2 to 1 on the New York Stock Exchange and on Nasdaq, in active trading.
At least 20 members of the S&P; 500 are due to report fourth-quarter earnings next week, and some investors said companies would need to increase 2005 profit forecasts for stocks to rise.
“I’m expecting sluggishness until something comes out there that gives a boost to confidence,” said Bob Sitko, a money manager at USAA Private Investment Management in San Antonio. “The Fed moves this year become more relevant than they were last and will have more of an effect” on stocks.
The market sank Tuesday after the Fed released the minutes of its Dec. 14 meeting. Many analysts said the minutes indicated that some Fed members were more worried about inflation than had been widely assumed. That could lead to a faster pace of interest rate increases this year, some experts warned.
Still, after the strong stock rally investors enjoyed during the last two months of 2004, some pullback was to be expected, said Arthur Hogan, an analyst at Jefferies & Co. in Boston.
“Yes, we expect earnings to be good, and yes, we expect good things out of corporate America, but we had a significant run-up and now we have to consolidate, and some folks are taking some profits,” Hogan said.
Among the day’s market highlights:
* Treasury bond yields steadied after surging Tuesday in the wake of the Fed’s meeting minutes. The 10-year Treasury note ended unchanged at 4.29%.
Possible signs of a weakening job outlook ahead of Friday’s December employment report may have helped bonds. Consulting firm Challenger, Gray & Christmas said planned job cuts in December were 109,045, making the holiday month the second-worst of 2004 for layoffs.
* Small-company stocks fell sharply for a third day. The Russell 2,000 index lost 1.8% after falling 1.9% on Tuesday and 1.7% on Monday. So far this year the Russell is down 5.2% after rising 17% last year.
* Delta Air Lines dropped 51 cents to $6.80 after slashing fares and scrapping its Saturday-stay requirement in a move to lure back customers. The move is expected to trigger a fare war. AMR, parent of American Airlines, gave up 96 cents to $9.05. Northwest Airlines tumbled $1.04 to $8.60.
* Circuit City Stores retreated $1.25 to $13.71 after saying December sales at stores open at least a year fell 5.8% as holiday discounting failed to spur buying. But Nordstrom gained $1.44 to $47.06 after saying December sales rose a better-than-expected 9.3%.
* Chip maker Xilinx shed 90 cents to $27.54 after lowering its third-quarter sales forecast, saying it expects an 11% to 12% decline due to lower bookings and shipments. Other chip firms also fell, with Siliconix down $2.88 to $32.85, Texas Instruments off 71 cents to $22.89 and Broadcom declining 55 cents to $31.01.
* Oil prices fell after the government reported sizable increases in gasoline and heating oil inventories last week. Near-term crude futures slipped 52 cents to $43.39 a barrel in New York trading.
* The dollar’s recent rally against the euro slowed. The euro slipped to $1.326 from $1.327.
