Stocks Face Hard Slog
WALL STREET BUYERS bided their time Thursday, worried that the war could take much longer than they bargained for. Iraq's refusal to crack under the initial blitz and its success in waging guerilla attacks on coalition supply lines have more and more U.S. commanders speculating that the fighting could last many weeks, maybe months, according to the Washington Post. Its story crystallized the doubts and second-guessing that have shadowed the war effort in recent days.
President George Bush and Prime Minister Tony Blair pointedly refused to discuss timetables at a press conference following their Camp David war council. "We will carry on until the job is done. But there is absolutely no point, in my view, of trying to set a time limit or speculate on it," Blair said.
There are already some murmurs in the ranks. "Tell me how this ends," one senior Pentagon officer asked the Post, sounding notably less confident than his bosses.
Traders were not well qualified to answer that question, which is why the Dow finished the session down 28 points to 8201. The Nasdaq retreated 3 to 1384, while the S&P 500 ducked a point to 868.
The selling, never especially brisk, abated notably in the afternoon, then picked up a bit as the closing bell neared. At no point did it panic the momentum players betting on another leg higher.
Airline and aluminum shares continued to struggle. Alcoa (AA), SBC Communications (SBC) and International Paper (IP) dragged down the Dow with drops of nearly 3% apiece.
The strongest blue chip belonged to Dow dog McDonald's (MCD), which gained 2% on hopes that the flabby fast-food chain will disgorge secondary franchises such as Boston Market and Donatos Pizzeria.
Oil drillers were the best-performing sector as the price of U.S. crude for May delivery rose another 6%, topping $30 a barrel. A long interruption of Iraqi oil deliveries would squeeze a supply chain already choked by ethnic violence in Nigeria and the aftermath of the strike in Venezuela. "Inventories need to start climbing very sharply to give any chance of avoiding a huge spike in gasoline prices," a J.P. Morgan analyst told Reuters.
Persistently high fuel prices could be the final straw for airlines coping with a 10% drop in traffic from unimpressive prewar levels. Continental's (CAL) U.S. bookings are down 20%, while its international business has slumped 40%.
The airline warned of "significant losses for the foreseeable future," not that Wall Street was expecting any different. It also revealed that the boss got an 82% pay raise to $7.6 million last year. The stock fell 7%.
High oil prices should be a boon for big supplier ChevronTexaco (CVX). But that stock fell 1% after the company previewed up to $300 million in upcoming after-tax charges for an accounting change and higher pension costs.
In contrast, Tommy Hilfiger (TOM) shares strutted to a 24% gain on a Wall Street Journal report that clothing maker Jones Apparel Group (JNY) is considering a winsomely wholesome buyout.
Whereas Robert Mondavi (MOND) shares spilled 6% after the wine maker warned it was fermenting a net loss and less than half the pro-forma quarterly profit it had forecast. The weak economy is diluting sales.
Shares of Steel Technologies (STTX) corroded 8% after the mill operator cut its own quarterly outlook roughly in half, citing weak sales and margins.
That news came as the World Trade Organization issued an interim ruling against U.S. steel tariffs.
Economic data got short shrift from traders fixated on a distant war. Unemployment claims fell 25,000 to a still-high 402,000 last week. The economy was confirmed to have grown at an annual pace of 1.4% in fourth quarter, back when Iraq was less of an issue.
Bonds inched up. The yield on the 10-year Treasury note slipped to 3.92% from Wednesday's 3.93%. The two-year note yielded 1.61%, down from 1.62% a day earlier.
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