NEW YORK – Wall Street, already beset by worries about the economy and world events, skidded even lower Monday on news that the head of Iraq’s governing council had been assassinated. The Dow Jones industrial average fell more than 100 points.
Bargain hunting helped the market recover a small part of its early losses, but investors’ overall mood was one of depression. Stocks also fell on foreign exchanges in response to the violence in the Middle East and to political and economic events in India and Japan.
Uncertainty over U.S. involvement in Iraq and President Bush’s re-election chances rippled through Wall Street after Iraqi Governing Council president Izzadine Saleem died in a suicide car bombing in Baghdad that took the lives of eight others. Oil prices surged on the news, and the dollar fell against most major currencies.
“Fear is what’s dominated this market over the past month and a half, whether it’s Iraq or interest rates or inflation,” said Brian Pears, head equity trader at Victory Capital Management. “Any new violence will have a negative effect on the market.”
The Dow fell 105.96, or 1.1 percent, to 9,906.91, the lowest close for the blue chips since Dec. 5. Earlier in the session, the index fell 150.10, but it recovered somewhat as investors searched for bargains after weeks of heavy losses.
Broader stock indicators were also sharply lower. The Nasdaq composite index lost 27.61, or 1.4 percent, to 1,876.64, its lowest close since Oct. 24. Standard &Poor’s 500 index was down 11.60, or 1.1 percent, at 1,084.10, for its lowest close since Dec. 17.
Overseas, India’s main stock market index initially fell more than 15 percent Monday, the biggest drop in its 129-year history, after a leftist coalition government was elected there. After trading was stopped twice, the markets finished the session down 11.1 percent after the government ordered state-run companies to heavily buy stock.
Meanwhile, Japan’s Nikkei stock average plummeted 3.2 percent after a major bank there announced it would report a large loss for the year. In Europe, Britain’s FTSE 100 fell 0.9 percent for the session, France’s CAC-40 closed down 1.4 percent and Germany’s DAX index fell 1.3 percent.
The U.S. market appeared to find a bottom last week after a major selloff. Combined with continued investor nervousness about rising interest rates and possible inflation, however, Saleem’s death sent stocks far below their previous lows for the year.
“The market is redefining its lows,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “I thought we had hit our lows last week, keeping above Dow 10,000 and 1,900 on the Nasdaq, but with each new event in Iraq, we’ll break new lows. And the inflationary effect of these higher oil prices won’t help long-term.”
Concerns over Iraq, inflation and interest rates outweighed the latest earnings news on Wall Street. Once-struggling Kmart Holding Corp. rose $4.32 to $48.62 after it posted its second straight profitable quarter after emerging from bankruptcy. However, same-store sales, a key gauge of retail success, continued to fall.
Lowe’s Companies Inc., the nation’s second-largest home improvement retailer, beat analysts’ estimates by 3 cents per share on its quarterly earnings. Lowe’s fell 90 cents to $49.68.
Toy retailer Toys “R” Us Inc. was down 24 cents at $14.14 after it lost a penny per share more than Wall Street had expected. The company blamed inventory liquidation at its competitors for tough sales in the quarter.
Nortel Networks Corp. dropped 31 cents to $3.26 after media reports of cash bonuses to top employees prior to a March 10 warning that earnings would have to be restated for a second time. That warning sent shares falling.
Faced with the market’s increasing anxiety over a number of issues, some analysts began wondering whether the Federal Reserve should move on interest rates prior to its June meeting.
“If the Fed were to act now, it would remove some of the uncertainty and maybe let people return to focusing on fundamentals,” said Michael Murphy, head trader at Wachovia Securities. “In the short term I think this market will rally. The economy’s rolling. The numbers are still good. Moving on interest rates would let us get back to work.”
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