Posted at 11:45 a.m., Tuesday, February 28, 2006
Stocks fall on mixed economic data
Associated PressNEW YORK A mixed economic picture sent stocks tumbling today, with the Dow Jones industrials falling more than 100 points after investors were unnerved by weakness in home sales, consumer confidence and manufacturing. An upward revision in the fourth-quarter gross domestic product, meanwhile, raised worries about higher interest rates.
The GDP showed that the economy grew at an annual rate of 1.6 percent, much better than the 1.1 percent the Commerce Department initially estimated and beating the 1.5 percent economists predicted. The GDP is the broadest measure of the economy's performance and one indicator of whether the economy continues to grow fast enough to prompt additional interest rate hikes by the Federal Reserve.
The day's other data showed soft spots in the economy. Sales of existing homes fell for the fifth consecutive month January, exacerbating some investors' concerns that a fall in homes sales and refinancings could choke off a source of wealth for consumers, slowing their spending.
Consumer confidence numbers reinforced that worry, dropping below analysts' estimates in February, according to The Conference Board, a New York-based private research group. And a survey of Chicago-area purchasing managers fell unexpectedly; it's seen as a precursor of national manufacturing figures due to be released tomorrow.
"The GDP (gross domestic product) upgrade could put more pressure on the Fed," said Jack A. Ablin, chief investment officer at Harris Private Bank. "At the same time, we're losing ground with the consumer.... From the perspective of today's market, it's a one-two punch."
According to preliminary calculations, the Dow fell 104.14, or 0.94 percent, to 10,993.41.
Broader stock indicators also fell sharply. The Standard & Poor's 500 index fell 13.46, or 1.04 percent, to 1,280.66, and the Nasdaq composite index fell 25.79, or 1.12 percent, to 2,281.39, hurt by a sharp decline in Google Inc.
Bonds edged higher, with the yield on the 10-year Treasury note falling to 4.55 percent from 4.59 percent late yesterday. The U.S. dollar fell against other major currencies. Gold prices rose.
Crude oil futures rose. A barrel of light crude was quoted at $61.41, up 41 cents, in trading on the New York Mercantile Exchange.
With scant earnings reports and few Federal Reserve speeches, economic data should continue to dominate the week, said Alexander Paris, economist and market analyst for Chicago-based Barrington Research.
"The problem is, investors have been going back and forth," about economic data, he said, pushing stocks higher on weak economic data one day, then lower on poor data another day.
"Sometimes they think a good economic report is good, other times they think it's bad," he said.
Another hurdle stock bulls face is "resistance levels." As the Dow and S&P 500 flirted with 4 1/2 year highs, those highs have become, effectively, a ceiling for stock prices, with investors selling off their holdings when the indexes neared those highs.
Stocks ended February mixed. The Dow gained 128.55, or 1.18 percent; the S&P rose 0.60, or 0.05 percent; and the Nasdaq lost 24.43, or 1.06 percent.
So far in 2006, the Dow is up 3.55 percent, the S&P is up 3.67 percent, and the Nasdaq is up 4.62 percent.
Google tumbled $27.76 to $362.62 after Chief Financial Officer George Reyes told investors that growth at the online search leader was slowing. Reyes told investors at a Merrill Lynch conference that the company would have to find new ways to boost revenues.
Office supply retailer Staples Inc. rose $1.47 to $24.54 after its fourth-quarter profit rose 15 percent, beating Wall Street expectations by a penny.
Online closeout retailer Overstock.com Inc. fell 57 cents to $22.50 after it said it would restate previously reported financial results going back to 2002 to correct how it accounted for freight costs. The correction will lower the net loss reported in each affected annual period, Overstock.com said, while boosting inventory as of Sept. 30, 2005, by $3.5 million.
BJ's Wholesale Club Inc., the third-largest U.S. warehouse club retailer, rose 46 cents to $31.66 after it said profit in the latest quarter rose nearly 10 percent, helped by strong gasoline sales.
Decliners led advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.78 billion shares, up from 1.44 billion for the same time yesterday.
The Russell 2000 index of smaller companies fell 9.99, or 1.35 percent, to 730.64.
Overseas, Japan's Nikkei stock average rose for the fourth straight session, edging 0.08 percent higher. Britain's FTSE 100 fell 1.44 percent, Germany's DAX index dropped 2.01 percent, and France's CAC-40 lost 1.58 percent.