Stocks Close Sharply Lower on GDP, Jobless Data

www.quicken.com Thursday, January 30, 2003 05:16 PM ET 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 weak gross-domestic-product and jobless reports plus news of a massive net 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.

Losses widened as the day dragged on, with the Dow Jones Industrial Average ending down 165.58 points, or 2%, at 7945.13, while the Nasdaq composite lost 35.71, or 2.6%, to 1322.35. Treasurys climbed.

Wall Street woke up on the wrong side of the bed with early news from the Commerce Department reporting a marked slowdown in fourth-quarter GDP growth. The total value of all goods and services produced in the economy limped forward 0.7%, compared with 4% growth 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 Saturday 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 2.3%.

After the close, earnings news continued to filter in. Dow component Walt Disney posted better-than-expected operating earnings, though net income sank to $256 million from $438 million.

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 3.9%.

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, dominated by tech stocks, gained 1.2%.

In major U.S. market action Thursday:

Stocks sank. On the Big Board, where nearly 1.50 billion shares traded, 2,192 stocks fell and 1,081 rose. On the Nasdaq, where 1.44 billion shares changed hands, 2,230 stocks declined and 1,050 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 3.974%. The 30-year bond was up about 7/8 point to yield 4.858%.

The dollar was stronger. It traded at 119.01 yen, compared with 118.32 yen late Wednesday in New York, while the euro fell against the dollar to $1.0817 from $1.0841.