Worries Bog Down Wall Street
Nagging worries about inflation bogged down Wall Street on Tuesday, with investors sending stocks lower as they tried to reconcile solid economic and earnings news, reports -- later disproved -- of anthrax discovered at the Pentagon and a gloomy outlook on semiconductor stocks.
Concerns that higher oil prices, which topped $55 a barrel, would accelerate inflation and lead to rising interest rates eroded investor confidence, and the Pentagon’s announcement about a possible anthrax discovery in its mailroom added to the general unease. The tech sector was hit particularly hard after a Merrill Lynch analyst said growth in chip stocks would be stalled for much of the year.
That made it difficult for Wall Street to rise on good news from the retail sector. Although the 0.5% growth in February retail sales fell slightly below Wall Street expectations, the Commerce Department revised its January figure upward, and auto sales were surprisingly strong in both months. Record earnings from Lehman Bros. were likewise discounted by midday, when stocks turned firmly negative.
“There’s not enough positive news to get investors to commit to new positions at this point,” said Michael Sheldon, chief market strategist at Spencer Clarke. “There’s a malaise hanging over the market right now without much of a catalyst to move higher.”
The Dow Jones industrial average fell 59.41 points, or 0.6%, to 10,745.10.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index was down 9.08 points, or 0.8%, at 1,197.75, and the tech-focused Nasdaq, hurt by the Merrill Lynch report, lost 16.06 points, or 0.8%, to 2,034.98.
All three major indexes finished at or near their lows for the session. Declining issues outnumbered advancers by more than 9 to 5 on the New York Stock Exchange.
Oil prices rose as investors worried that OPEC might not follow Saudi Arabia’s lead and increase oil production. A barrel of light crude settled at $55.05, up 10 cents, on the New York Mercantile Exchange.
The bond market slipped lower, with the yield on the 10-year Treasury note rising to 4.55% from 4.51% on Monday. The euro fell to $1.331, down from $1.337.
Wall Street paid close attention to Federal Reserve Chairman Alan Greenspan’s testimony on Capitol Hill, hoping to hear his latest views on inflation and interest rates. Greenspan, whose topic Tuesday was Social Security, warned that federal budget deficits, not inflation, remained the greatest threat to the economy.
In other market highlights:
* Lehman Bros., the first major Wall Street firm to report fiscal first-quarter earnings, climbed $2.87 to $96.19. The company said profit for the period ended Feb. 28 climbed 31% to a record $875 million, or $2.91 a share, fueled by surging revenue from fixed-income trading and investment banking. Lehman was expected to earn $2.20 a share, according to the average estimate of analysts surveyed by Thomson First Call.
Bear Stearns added $1.29 to $106.03. Goldman Sachs Group rose 54 cents to $110.54. Both report results this week.
* The anthrax incident boosted shares of Cepheid, which makes anthrax-detection equipment for the U.S. Postal Service. Cepheid climbed 88 cents to $10.39, while Avant Immunotherapeutics Inc., which is developing a vaccine for anthrax, added 12 cents to $1.78.
* TiVo, a maker of digital television recorders, jumped $2.87, to $6.70. Cable TV giant Comcast agreed to offer TiVo’s service to 21.5 million cable TV customers next year. TiVo’s recorders allow users to pause and replay live television. Comcast fell 8 cents to $33.91
* Liberty Media added 27 cents to $10.50. The company controlled by cable TV investor John Malone said it would spin off its Ascent Media and Discovery Communications units into a new company called Discovery Holding. Holders of Liberty Media common stock will receive 0.05 share of Discovery Holding stock.
* The SOX semiconductor index was off 2.1% in response to the Merrill Lynch report on chip stocks, while Dow component Intel fell 39 cents to $23.88 and Advanced Micro Devices lost 37 cents to $16.07.
* Drug maker Genentech slid 75 cents to $54.25 after having been strongly higher most of the session. The company announced that studies showed that its colon cancer drug Avastin was effective in treating lung cancer patients as well. The news led to two brokerage upgrades of Genentech’s stock.
* American International Group’s longtime chief executive, Maurice “Hank” Greenberg, officially stepped down late Monday, remaining as non-executive chairman. The Dow component also announced a major reshuffling of the executive ranks, to be headed by new CEO Martin Sullivan. AIG lost $1.93 to $61.92 as the nation’s major credit agencies lowered or promised to review the company’s debt ratings.
