Stocks ended a bad week on an especially bad note.
The S&P’s 500 index registered its biggest one-day loss in four months, while all 30 stocks in the Dow Jones industrial average fell for the second time in a week.
“Investors are feeling frozen and brittle – and not just because of the weather,” said Alan Ackerman, executive vice president at Fahnestock & Co. “The parade of uglies continues – with Iraq, with the sinking economy, with concerns about profits. American Express is set to report next week and there’s some nervousness because the financials haven’t been strong so far this reporting season.”
The S&P 500 fell 25.94, or 2.92 percent, to 861.40, with one-quarter of the loss coming from financial services companies.
The Dow Jones industrial average plunged 238.46, or 2.85 percent, to 8,131.01. The Nasdaq composite index declined 46.13, or 3.32 percent, to 1,342.14.
Wall Street strategists say the markets tanked because investors are convinced American tanks will be rolling into Iraq any day now.
Weapons inspectors with the United Nations are scheduled to release the results of their Iraqi investigations on Monday. Traders were hesitant about having open positions going into the weekend because there is growing belief the Bush administration will use the report as a catalyst to begin an attack.
President Bush’s state of the union speech is slated for Tuesday night, and many market pros believe the speech will primarily make the case for an Iraq attack, with or without U.N. support.
“Earnings news was light and the economic calendar was blank,” said Bernie Schaeffer, chairman of Schaeffer’s Investment Research. “That leaves investors with little to go on and opens the way for selling.”
Profit growth has not been as strong as Wall Street had been predicting. Based on the companies that have already reported fourth-quarter earnings, profit growth was up, on average, 8.4 percent. Wall Street analysts had been been predicting a 12 percent rise in profits.
Meanwhile, consumers are scaling back their spending. Corporations, which have been scaling back on their spending for three years now, don’t seem ready to increase it yet.
“Worries about capital spending and consumer purchases are creating fears of another soft quarter,” said Larry Kudlow, chairman of Kudlow & Co., an economic and political consulting firm. “It’s not a happy picture.”
It was hard to find a safe haven on Wall Street yesterday. As stocks fell, so did the dollar, for the ninth straight day. That’s a record string of down days for the dollar.
Some say the weakening dollar is a sign that foreign investors are pulling money out of U.S. assets, including U.S. Treasury bonds and U.S. stocks.
The 10-year bond rose slightly yesterday, pushing its yield down 3 percentage points to 3.91 percent, but investors have lost money on U.S. bonds so far this year. The 10-year bond has a year-to-date loss of 0.4 percent.
Three stocks fell for every one that rose on the New York Stock Exchange and the Nasdaq. Some 1.15 billion shares changed hands on the Big Board, up 13 percent from a week ago.
Hitting the skids
Stocks sank yesterday as the threat of war with Iraq loomed. Here’s what else hit the market:
* Profit growth for the quarter so far hasn’t met the Street’s expectations.
* Corporate and consumer spending isn’t expected to take off near-term.
* The dollar fell for the ninth straight day.