Stocks See Yet Another Week of Losses
Make it zero for three.
The Dow Jones industrial average and other key stock indexes stumbled after an early rally Friday, skidding into their third straight weekly loss.
It was the first time since 1982 that the blue-chip Dow and technology-heavy Nasdaq both began the year with three down weeks.
January is usually one of the stock market’s better months, as investors put new cash to work.
“This is a little troubling,” said Russ Koesterich, strategist at State Street Global Markets in Boston. “We’re still in the first inning of the year, but it doesn’t bode well. You can’t spin it any other way.”
The Dow lost 78.48 points, or 0.8%, to 10,392.99. The Standard & Poor’s 500 index shed 7.54 points, or 0.6%, to 1,167.87. Nasdaq fell 11.61 points, or 0.6%, to a 10-week low of 2,034.27.
For the holiday-shortened week, the Dow lost 1.6%, the S&P; 500 slid 1.4% and Nasdaq slumped 2.6%. Year to date, the Dow and the S&P; both are down 3.6% and Nasdaq is off 6.5%.
Rising oil prices were a big damper Friday. Crude oil for March delivery jumped $1.22 to $48.53 a barrel after a report said continued strong demand from China would constrict supplies.
High energy prices can crimp profits at companies that must buy fuel and other natural resources. But they are just one of the economic factors weighing on the market, according to Wall Street professionals.
Expectations of more interest rate increases, combined with weaker corporate profit growth, are also making investors nervous about equities.
The Federal Reserve is widely expected to raise interest rates at its February meeting and possibly several more times this year, Koesterich said, making it more expensive for companies to borrow money and possibly slowing consumer spending.
And after the market’s big run-up late last year, investors are unloading stocks to lock in their profits.
“From August through the end of the year you had a strong rally with very little profit taking on the way up,” said Kevin Marder, strategist at Ladenburg Thalmann Asset Management in Los Angeles. “At some point, you have to expect a normal correction like we’re seeing.”
Even so, he said, “the stock market is repositioning itself for a slower-growth environment in 2005.”
Profit growth for S&P; 500 companies is expected to slow into the single digits this year, he noted. Against that backdrop, “defensive” stocks such as drugstore chains, health maintenance organizations and tobacco makers have held up well this year. By contrast, aggressive issues such as those in the Internet sector, where earnings growth can be stronger but less reliable, have been hit hardest.
“People are playing it safe right now,” Marder said.
The market might have received a lift from better-than-expected profit results for General Electric and brokerage upgrades for Dow components Citigroup and Verizon Communications. But those positives were countered by the University of Michigan’s consumer sentiment index, which slid to 95.8 in January from 97.1 in December, falling shy of forecasts.
GE fell 24 cents to $35.13 despite reporting an 18% surge in fourth-quarter profit, topping analysts’ consensus forecast.
Citigroup rose 16 cents to $47.93 after an analyst at Merrill Lynch called the financial giant a bargain, and Verizon added 23 cents to $36.50 on a Deutsche Bank recommendation.
In other market highlights:
* Fortune Brands, whose products include Jim Beam whiskey and Titleist golf gear, surged $4.11 to $79.91 after beating Wall Street’s earnings expectations.
* Jones Apparel Group tumbled $2.30 to $33.44 after lowering its earnings guidance for the fourth quarter and for this year.
* Saks slumped 64 cents to $13.76 after a Goldman Sachs report said an anticipated merger between Federated Department Stores and May Department Stores could remove possible suitors for the company.
* Scientific-Atlanta dropped $1.86 to $29.30 after the maker of cable gear said sales fell shy of expectations in its latest quarter.
* In the Treasury market, the yield on the 10-year T-note eased to 4.14% from 4.16%.
