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DOW DOWN
The market's concerned that a war with Iraq would further suppress an already weak economic recovery.
Source: Associated Press, 2003-01-30
Candidate: Big Business
NEW YORK (Jan. 30) - Investors perturbed by the government's latest gross domestic product report sent stocks sharply lower Thursday, halting a two-day rally. The Dow Jones industrials dropped more than 160 points, giving the blue chips a two-week loss of nearly 900 points.
The sell-off wasn't surprising as the GDP news confirmed investors' fears about a frail economy. But the larger issue remained the market's concern that a war with Iraq would further suppress an already weak economic recovery.
''That's at the top of the anxiety list for investors,'' said David Sowerby, chief market analyst at Loomis, Sayles & Co. in Detroit.
The Dow closed down 165.58, or 2 percent, at 7,945.13. The blue chips more than wiped out a gain of 121.15 from the previous two sessions, their first multiple-day winning streak in two weeks.
The Dow closed back below the 8,000 level, as it did Monday for the first time in three months.
The broader market also fell sharply. The Nasdaq composite index sank 35.71, or 2.6 percent, to 1,322.35. The Standard & Poor's 500 index slid 19.75, or 2.3 percent, to 844.61.
All three indexes suffered their eighth decline in 11 sessions. For the Dow, all but one of its eight losing sessions resulted in a triple-digit loss. Over the past 11 sessions, the Dow has plummeted 897.49.
Investors were disheartened Thursday by news that the economy grew at an incredibly slow pace in the fourth quarter. The Commerce Department reported that the economy as measured by the gross domestic product rose at an annual rate of just 0.7 percent in the final three months of 2002 as consumers buckled in the face of war worries, a third year of stock market declines and a dismal job climate.
The GDP performance missed analysts expectations for a 0.9 percent increase and was a huge drop from the 4 percent growth rate registered in the third quarter.
But analysts said investors are more concerned about the prospects of war with Iraq than they are with economic data about previous months, which they already expect to be dismal.
Analysts don't expect the market or the economy to rebound until it is clear whether there will be a war and how the United States fares in it.
''You can't separate the two,'' said Arthur Hogan, chief market analyst at Jefferies & Co. ''Geopolitically, we have this overhang of war, and fundamentally what that causes is high prices for oil and high demand for gold and for bonds but none for stocks.''
Having heard President Bush say in his State of the Union address that a war is more certain, investors are now focused on Secretary of State Colin Powell's scheduled appearance before the U.N. Security Council. Next Wednesday, Powell is due to discuss new intelligence information on Iraq.
AOL Time Warner fell $1.96 to $12 after announcing late Wednesday it lost $44.9 billion, or $10.04 a share, in the fourth quarter. But after a $45.5 billion charge to account for the media giant's plummeting value, AOL met expectations with earnings of 28 cents a share. The company also announced that vice chairman Ted Turner was stepping down.
While AOL's loss was staggering, analysts said it had little to do with the sell-off on Wall Street.
''It is more that people think the economy is going to be paralyzed while we wait to see how this whole thing unfolds (in Iraq),'' said Todd Clark, head of listed equity trading at Wells Fargo Securities.
Other individual stocks traded lower on their own disappointing earnings news. Gillette fell 60 cents to $29.50 after the consumer products maker missed earnings expectations by 2 cents a share.
Gateway declined 19 cents to $2.73 after posting a fourth-quarter loss late Wednesday that was 3 cents a share larger than analysts forecast.
But CSX rose 88 cents to $27.63 on fourth-quarter earnings that beat Wall Street's forecast by 7 cents a share.
Declining issues outnumbered advancers more than 2 to 1 on the New York Stock Exchange. Consolidated volume was light at 1.85 billion shares, below 1.97 billion on Wednesday.
The Russell 2000 index, the barometer of smaller company stocks, fell 7.22, or 1.9 percent, to 367.62.
Overseas, Japan's Nikkei stock average finished Thursday down 0.2 percent. In Europe, France's CAC-40 climbed 2.6 percent, Britain's FTSE 100 rose 2.7 percent, and Germany's DAX index fell 0.5 percent.
Amy Baldwin
AP-NY-01-30-03 1736EST
Copyright 2003 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.
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