Poor economic news drags down stocks
By Hope Yen
NEW YORK Wall Street closed modestly lower today, pressured by a pair of disappointing economic reports and investor caution as U.S.-led forces made their final push into Baghdad.
Analysts said some investors were disheartened by the data on jobless claims and the U.S. service sector. But most were waiting for the latest developments on Iraq before making stock commitments.
"As we near Baghdad, people are wondering how quickly things are going to go. They know this is the key battle," said Brian Pears, head equity trader at Victory Capital Management. "A long, drawn-out battle could certainly depress investors. Conversely, if the government fell quickly, people will be euphoric."
The Dow Jones industrial average closed down 44.68, or 0.5 percent, at 8,240.38, having gained 292 points the previous two sessions. Earlier in the day, blue chip stocks rose as much as 50 points.
The broader market also fell modestly. The Nasdaq composite index slipped 0.14, or 0.01 percent, to 1,396.58. The Standard & Poor's 500 index dropped 4.45, or 0.5 percent, to 876.45.
Today, U.S. troops stormed one of Saddam Hussein's presidential palaces near Baghdad and attacked the international airport. A U.S. spokesman said there were "credible signs" that Iraqi forces were nearing collapse as Saddam urged his people to "fight them with your hands," according to a statement read on Iraqi television.
Trading has been choppy in recent weeks as investors focus on the latest headlines and make bets on how long the war will last. The fear is that a protracted military conflict would stifle business spending that is critical to revitalize the nation's economic recovery.
"As our troops get closer and closer to Baghdad, and people get more optimistic, I think we'll have a potential for a rally," said Ryan Smith, managing director of equity trading at Banc One Investment Advisors. "But I don't think it will be gigantic until the war is in fact over."
Economic reports on unemployment and the service sector, meanwhile, weighed on stocks.
The Labor Department reported that jobless claims rose last week by a seasonally adjusted 38,000 to 445,000, representing the highest level of new claims since April 2002. The figure was also worse than analysts' predictions.
And the Institute for Supply Management said its non-manufacturing index slid to 47.9 in March from 53.9 in February, indicating a contraction in the U.S. service sector after 13 straight months of growth. Economists were forecasting a reading of 52.5.
"The reports are definitely a bit of a drag today," Pears said. "As the war goes on, you'll hear more talk of how well the economy is doing. But no matter what comes out, good news from the battlefield is good news for stocks."
Declining issues outnumbered advancers 5 to 4 on the New York Stock Exchange. Volume was light. The Russell 2000 index, a barometer of smaller company stocks, fell 1.08, or 0.3 percent, to 375.22.
In Europe, France's CAC-40 climbed 1.6 percent, Britain's FTSE 100 advanced 0.5 percent and Germany's DAX index fell 0.8 percent.