Stocks Fall As Economic Reports, Disappointing Quarterly Reports Stir Concerns About Economy
NEW YORK (AP) -- Stocks fell sharply Friday after a series of depressing economic and earnings reports and high oil prices stoked concerns about the health of economy. The major stock indexes fell more than 2 percent, with the Dow Jones industrials at times giving up more than 300 points.
Investors were unnerved by disappointing quarterly results from American International Group Inc. and Dell Inc. And an index of regional business activity that Wall Street regards as a good indicator of a broader report set to arrive next week registered its weakest reading in more than six years.
Adding to Wall Street's list of worries, oil prices continued to stir concern about inflation after topping $103 per barrel for the first time, in electronic trading overnight.
While stocks made sharp gains in the first three days this week even amid somewhat lackluster economic readings, the litany of concerns investors succumbed to Friday reflected the undercurrent of uncertainty that has kept Wall Street on edge for months.
"We really had to face a plethora of negative news," said Art Hogan, chief market strategist at Jefferies & Co. in Boston.
Hogan said while stocks had managed big gains for much of the week, Fridays have been difficult days for Wall Street in the past year or so since cracks began to appear in the credit markets and as concerns have emerged about the economy. Investors worry that unwelcome news might break on the weekends, causing selling pressure in the week's final session.
In the final half-hour of trading, the Dow fell 317.82, or 2.53 percent, to 12,264.36. The decline more than erased the week's 200 point gain.
Broader stock indicators also tumbled. The Standard & Poor's 500 index lost 32.66, or 2.39 percent, to 1,335.02, and the Nasdaq composite index declined 52.46, or 2.25 percent, to 2,279.11.
Bond prices rose sharply as stocks lost ground. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.54 percent from 3.67 percent late Thursday.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped nearly 13 percent.
The dollar showed a slight rebound Friday after hitting a record low against the euro Thursday. The slide in the dollar has sent prices of commodities such as oil and gold soaring.
Light, sweet crude fell 75 cents to $101.84 on the New York Mercantile Exchange after spiking to $103.05 overnight. Meanwhile, gold prices rose.
Insurer AIG announced a $5.29 billion quarterly loss largely because of steep declines in the value of a portfolio of contracts known as credit default swaps. Such contracts pledge to cover missed payments on debt. The company's losses caught analysts off guard, as many had expected the company to turn a profit. While each of the 30 stocks that comprise the Dow industrials showed declines, those of AIG were the steepest. The stock fell $3.50, or 7 percent, to $46.65.
Computer maker Dell posted a 6 percent decline in its quarterly profit, falling below analysts' expectations, and warned that its business could suffer from reduced customer spending. Dell slid $1.10, or 5.3 percent, to $19.76.
Bill Shultz, chief investment officer at McQueen, Ball & Associates, said AIG's report left investors uneasy about the prospect of further sizable write-downs of bad debt.
"Every time we get to a point where we think we've finished, another report comes out and says we're not done yet," he said.
He expects Wall Street will continue to proceed with "fits and starts" until investors sense that the bad debt from faltering mortgages has been accounted for and that balance sheets are on the mend.
Some relief for the ailing bond insurance industry is on the way, though the news did little to dislodge Wall Street's glum mood Friday. Billionaire investor Wilbur Ross agreed to invest up to $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd. Assured Guaranty rose $2.66, or 11.7 percent, to $25.44.
In economic news, the Chicago purchasing managers index for February came in at 44.5, a weaker reading than the 48.5 that had been expected, according to Dow Jones Newswires. The report painted a dreary picture of the manufacturing sector and is seen as a precursor to the national Institute for Supply Management report expected Monday.
A government report showed that personal spending, when stripping out the effects of inflation, stood unchanged in January. The findings arose further concern that consumers are more hesitant to reach into their wallets amid the uncertainties facing the economy.
A parade of economic worries has weighed on consumer as well. The Reuters-University of Michigan final consumer sentiment reading for February came in at 70.8, better than the figure of 69 that had been expected. Still, the index was well off the level of 78.4 seen in January.
Declining issues outnumbered advancers by about 8 to 1 on the New York Stock Exchange, where volume came to 1.23 billion shares.
The Russell 2000 index of smaller companies fell 19.93, or 2.82 percent, to 685.79.
Overseas, Japan's Nikkei stock average closed down 2.32 percent. Britain's FTSE 100 closed down 1.36 percent, Germany's DAX index fell 1.67 percent, and France's CAC-40 fell 1.67 percent.
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Feb 29, 2008, 04:04:32 PM
but it certainly has been volatile for all of 2008 so far.