Investors fret about economy
Advertiser News Services
Saddam Hussein's statue wasn't the only thing that closed lower yesterday.
Bloomberg News Service
Wall Street jubilation at scenes of Iraqis in Baghdad attacking symbols of their former leader and welcoming U.S. troops dissolved into concerns about corporate profits.
Traders work on the floor of the New York Stock Exchange as a television carries news coverage of the war in Iraq. Stocks fell as concern that the economy is slowing tempered optimism that the war is drawing to a close.
Anyone hoping for a "victory" rally has been sorely disappointed this week. Even some market professionals who figured that stocks could take a breather after rallying ahead of the war say they were stunned by yesterday's session, when the Dow Jones industrials fell 100.98 points, or 1.2 percent, to end at 8,197.94.
Broader indexes also slid, though trading volume was muted — in part because many investors and traders were glued to TV images from Iraq.
The swift U.S. military campaign to topple Saddam "proved all the naysayers wrong," said Alan Skrainka, investment strategist at brokerage Edward Jones in St. Louis.
"This is positive — I mean come on!" he said, expressing dismay at the day's losses.
Adding insult to Wall Street's injury, oil and gold prices rose while Treasury bond yields fell. That was the markets' pattern for much of the first quarter as worries about the impending conflict blackened investors' mood.
Many analysts defaulted to the explanation that the market has simply been following the usual script in crises: Rally on expectations of a positive outcome, then sell when it happens.
"We did this victory dance as a prelude to the war," said Art Hogan, market analyst at brokerage Jefferies & Co. in Boston.
Indeed, the Dow surged nearly 1,000 points from March 12 to March 21. At yesterday's close, the index has given back 324 points.
Some said the war, even if it isn't quite concluded, has already become old news for investors — and that the focus now has shifted back to the U.S. economy and whether it can muster a sustained rebound soon.
A key assumption as stocks rallied in mid-March was that a fast war would give consumers and businesses the confidence needed to open their wallets, after months of holding tight to their dollars in fear.
That may yet happen, experts say. But investors may want more evidence in hand before raising their bet on stocks.
An immediate concern is first-quarter corporate earnings reporting season, which is just under way. More than 500 companies have warned that results will be below expectations, according to Thomson First Call.
Hogan said Wall Street will be more interested in what, if anything, chief executives and chief financial officers say about the rest of the year — specifically, whether they offer much hope for a turnaround in sales and profit.
As for consumer spending, Gary Schlossberg, economist at Wells Capital Management, noted that a Mortgage Bankers Association index measuring applications for mortgage loans to buy homes (as opposed to applications for refinancing loans) rose last week to the highest level since early September. That suggests that more consumers are gaining confidence in the economy.
Some analysts said they weren't too troubled by yesterday's trading. The falloff in volume indicated there was no rush to exit. And declining stocks outnumbered winners by a slim 9-to-7 margin on the New York Stock Exchange.
Traders said business slowed to a crawl as the first TV images were broadcast showing the Saddam statue in Baghdad being toppled. New York Stock Exchange floor workers cheered the sight.
But after an early rally that lifted the Dow as much as 90 points, sellers had control of the market for most of the day.
Broad U.S. indexes suffered bigger losses than the Dow. The S&P 500 dropped 12.30 points, or 1.4 percent, to 865.99. The Nasdaq composite lost 26.20 points, or 1.9 percent, to 1,356.74.
Bullish action shifted to the commodity markets. Near-term crude oil futures in New York rose 85 cents to $28.85 a barrel.
Wall Street bulls had assumed oil prices would slide with a U.S. victory, giving the economy a boost. But earlier this week, the OPEC said its members would meet April 24 to consider production cuts to shore up prices.
