Dow flirts with 8,000
money.cnn.com January 27, 2003: 3:30 PM EST
Fear of war with Iraq takes its toll on U.S. markets; blue chip average at its lowest in 3 months.
NEW YORK (CNN/Money) - Investors continued to pummel the stock market Monday afternoon after progress reports from U.N. weapons inspectors failed to quell fears about the likelihood of war with Iraq.
Shortly after 3:00 p.m. ET, the Dow Jones industrial average (down 109.77 to 8021.24, Charts) and the S&P 500 index (down 11.49 to 849.91, Charts) both lost just under 2 percent, while the Nasdaq composite (down 15.45 to 1326.69, Charts) lost more than 1.5 percent. The Dow's decline continued to outpace that of the other indexes, and the average briefly fell below 8,000 for the first time since October. Its losses Monday came on top of a 5-percent decline last week.
"The market has had war jitters and that, to a large extent, is responsible for a lot of the retreat over the last few weeks, but the decline comes with the backdrop of other things," said Michael Carty, principal at New Millennium Advisors. "You have worries about North Korea, Venezuela, the elections in Israel, you have companies saying that they won't provide guidance, like McDonald's and Coca-Cola. There are tremendous amounts of cash out there, but nobody wants to get in."
Chief U.N. weapons inspector Hans Blix delivered his team's 60-day progress report to the U.N. Security Council Monday morning. Blix said that although Iraq has cooperated with U.N. inspectors, it has failed to offer proof of its complete disarmament from weapons of mass destruction. The report by Blix and International Atomic Energy Agency director general Mohamed ElBaradei indicated that inspectors would need more time to complete their task in Iraq.
Uncertainty over whether inspectors will get an extension for their work has left investors skittish and has pressured U.S. stock markets and the dollar. Although several key members of the Security Council, including France and Germany, have said inspectors should be given more time, U.S. officials have stated that the country is prepared to go to war with Iraq alone.
"You had a terrible day Friday with the market pricing in the reality of these events and you have a continuation of that reaction now. There are no surprises. It's pretty much across-the-board negativity," said Douglas Altabef, managing director at Matrix Asset Advisors.
Following the morning's reports, Bush Administration officials said that Iraq was not in compliance and that the U.N. needed to reassess how it approaches the situation.
"The U.N. says go slow, the U.S. says the fact that Blix can't find anything is more of a comment on Blix than anything else," Matrix Asset Advisors' Altabef added. "The point is, Bush is not going to be deterred by these findings."
The Iraqi weather is also a factor in any military action, Altabef said, noting that if the Bush Admininstration is going to act, it will need to do so soon, because after April, extremely hot weather would impact military action.
The United States' position will become more clear Tuesday, when President George Bush is scheduled to deliver his annual State of the Union address, a portion of which is expected to be dedicated to the government's views on Iraq.
Another factor likely to impact the market in the coming days is the two-day meeting of the Federal Reserve's policy setting Federal Open Market Committee, set to begin Tuesday. Tech stocks lag, too
The day's corporate news was scattered and mostly bearish. Two of the technology sector's titans, Microsoft (MSFT: down $0.81 to $49.04, Research, Estimates) Chairman Bill Gates and Hewlett-Packard (HPQ: down $0.52 to $18.23, Research, Estimates) CEO Carly Fiorina, both said over the weekend at the World Economic Forum in Davos, Switzerland, that they don't see demand for new information technology picking up anytime soon.
Most major technology stocks, including Microsoft and Hewlett-Packard, declined. Microsoft, a member of the Dow industrials, was the Nasdaq's No. 1 most active issue.
Although the period of reporting fourth-quarter earnings is coming to a close, a few big names are still expected to report results this week. Dow component American Express (AXP: up $0.08 to $33.78, Research, Estimates) reported a profit of 52 cents per share, more than twice what it earned a year earlier and a penny better than what analysts were expecting. The company is the first of 11 Dow components due to report results this week. Its stock, which had been down all morning, rose modestly after the report.
Shares of Dow component Johnson & Johnson (JNJ: down $1.31 to $52.30, Research, Estimates) fell after the consumer products company said late Friday that it will take a charge in the fourth quarter after a court ordered it to reimburse Amgen (AMGN: down $1.46 to $50.78, Research, Estimates) for attorneys' fees and other costs associated with a licensing dispute.
On the Nasdaq, shares of i2 Technologies (ITWO: down $0.32 to $0.94, Research, Estimates) lost 25 percent in active trade after the business software maker said it would need to reaudit 2001 and 2002 results after the Securities and Exchange Commission began an informal inquiry.
Gold climbed $1 to $369.40 an ounce, after having risen above $370 for the first time in about six years earlier in the session.
Market breadth was negative, with losers beating gainers both on the New York Stock Exchange, by about 3 to 1, and on the Nasdaq, by more than 11 to 5. Some 1.07 billion shares changed hands on the NYSE and 1.12 billion shares traded on the Nasdaq.
Bond prices fell, pushing the yield on the 10-year note up to 3.97 percent from 3.93 percent late Friday. Bond prices and yields move in opposite directions.
The dollar continued to lose ground against the euro, but rose modestly against the yen.
The war rumblings fueled buying in oil futures overnight, but light crude retreated in New York after the day's announcements, with its price falling 80 cents to $32.48 a barrel.
Overseas stock markets took a beating, unsettled by the increasing prospect of war in the Middle East. European stocks closed lower, while Asian-Pacific markets also lost ground, with Tokyo's Nikkei 225 index shedding 1.4 percent.