Data on GDP, Joblessness Push Major Indexes Lower

www.quicken.com Thursday, January 30, 2003 03:38 PM ET  Printer-friendly version   The Wall Street Journal Online

The economy is slowing, Iraq fears are growing, and profits are eroding.

That bearish refrain echoed on Wall Street again Thursday, making for another lousy trading day as a weak gross domestic product report, jobless figures and news of a massive loss at AOL Time Warner threw more water on the market.

Meanwhile, a coalition of European states said they'd throw their weight behind the U.S. in its effort to force Iraq to disarm, highlighting anew the immediacy of conflict.

The Dow Jones Industrial Average was off by about 114 points by late afternoon, while the Nasdaq composite lost 27 points.

Before the start of trading, the Commerce Department released its first estimate of growth in the fourth quarter, which showed a marked slowdown from the third quarter. Gross domestic product, the total value of all goods and services produced in the economy, advanced 0.7%, compared with growth at a 4% annual rate in the third quarter.

Economists had forecast an increase of 0.6%. For the full year, GDP grew 2.4%, compared with 0.3% in 2001. While the results weren't spectacular, the market showed a muted reaction, and some even found encouragement in the details despite the weak headline number.

"This is something of a relief -- a negative number, with its attendant unpleasant optics, was possible," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "The big surprise here is that ... spending on equipment and software rose at a 5% pace. This is the third straight gain ... it is very encouraging to see spending rise given the third-quarter drop in business confidence."

Meanwhile, initial jobless claims for the week ended Jan. 25 rose 14,000, compared with a rise of 18,000 in the earlier week, the Labor Department said. Economists had forecast a smaller increase, of 4,000.

After the close of trading Wednesday, AOL Time Warner posted a 2002 loss of $ 98.7 billion -- the widest annual corporate loss in history -- after taking a fourth-quarter charge of $45.5 billion, mostly to write down the value of its troubled America Online unit. The write-down was more than twice what Wall Street had anticipated.

Its shares tumbled 14%. The company also announced the resignation of Ted Turner as vice chairman, the latest in an exodus of senior executives.

Aside from AOL's news, equities traders are focusing on several major companies reporting earnings early Thursday. Among them, Exxon Mobil reported a 53% jump in net income as concerns over unrest in Venezuela and war in Iraq lifted oil and gas prices and gave a considerable boost to the company's revenue. Its shares, which have shown strength of late, lost 1.2%.

AstraZeneca said its fourth-quarter profit fell 41% as the company put aside $ 350 million to cover a likely legal settlement. But sales at the Anglo-Swiss pharmaceutical company rose 12%. Its shares were up 4%.

Dow component Walt Disney is scheduled to report its financial results after the close of trading Thursday. Its shares were down 4.2%.

After a rocky beginning Wednesday, the market turned higher to post a second straight day of gains. Traders got some help from a decision by Federal Reserve policy makers to leave target interest rates unchanged, and by the Fed's reassuring comment that, once geopolitical risks lift, the economy should improve. The Dow industrials, off almost 144 points early in the day, finished up 21.87. The Nasdaq Composite Index, dominated by tech stocks, gained 1.18%.

In major U.S. market action Thursday:

Stocks were weak. On the Big Board, where 1.20 billion shares traded, 2,093 stocks fell and 1,165 rose. On the Nasdaq, where 1.15 billion shares changed hands, 2,175 stocks declined and 1,031 advanced.

Bonds were higher. The 10-year Treasury note gained about 3/8 point, or $3.75 for each $1,000 invested. The yield, which moves inversely to price, fell to 3.98%. The 30-year bond was up more than 1/2 point to yield 4.87%.

The dollar was stronger. It traded at 119.19 yen, compared with 118.32 yen late Wednesday in New York, while the euro fell against the dollar to $1.0803 from $1.0841.