By Lisa Singhania
Associated Press
NEW YORK – Stocks fell back Wednesday as investors, wary about the economy and awaiting the U.S. response to the Sept. 11 terrorist attacks, collected profits after Wall Street’s two-day advance.
Analysts said the retreat was to be expected, given the week’s earlier gains and the economy’s ongoing troubles.
“Obviously we’ve had some slippage, but if we compare where we are today to where we were last week … this isn’t a significant selloff,” said Michael Strauss, managing director at Commonfund. “The market is trying to bottom. The economy continues to be the battleground and we’re getting some weakness associated with the terrorist attacks.”
The Dow Jones industrial average fell 92.58 to 8,567.39, according to preliminary calculations, giving back nearly a quarter of its 424-point advance of Monday and Tuesday.
The Nasdaq composite index slid 37.60 to 1,464.04, while the broader Standard &Poor’s 500 index was down 5.23 at 1,007.04.
Many on Wall Street are hesitant to make any big commitments until they have a better idea of the form and timing of U.S. retaliation for the assaults on the Pentagon and World Trade Center.
No trader wants to be caught with a significant holding of a particular stock going into the weekend for fear that political events could upset the stock’s value.
“You don’t know what might happen Saturday, if that might be when retaliation or something happens, and how that will affect the market,” said Chris Wolfe, equity market strategist for J.P. Morgan Private Bank. “So you don’t want to take many chances.”
Those concerns, as well as profit-taking from Monday’s big rally that sent the Dow up 368 points, appeared to drive much of Wednesday’s trading.
In the tech sector, IBM dropped $3.15 to $91.30 and Sun Microsystems fell 25 cents to $8.44 – a loss of about 3 percent for each stock – after Goldman Sachs cut their earnings estimates on fears that companies will have less to spend on both firms’ products as they recover from the assaults.
Reaction to the economic fallout wasn’t all negative, however.
Delta Airlines gained 34 cents to $24.86 on news of 13,000 job cuts, about 15 percent of its work force, because of declining air travel following the terrorist attacks two weeks ago.
The other light buying was concentrated in sectors considered less risky in times of uncertainty, including pharmaceuticals and consumer goods. Johnson &Johnson rose $1.18 to $54.12, while Procter &Gamble climbed 13 cents to $71.12.
And oil stocks prices were weak – but not directly because of terrorist worries. Despite some concerns that a Middle East crisis could hurt U.S. oil supplies and access, analysts said the sector was down because of investors’ greater fears that the economy might tip into recession, creating less demand. Valero Energy dropped 77 cents to 33.41.
Market watchers also attributed some of the selling to the usual end-of-quarter trading by fund managers seeking to even out their portfolios. The third quarter ends Sunday.
But the market appeared to be on more stable footing than it was last week, when the Dow fell 1,369 points, its worst performance since the Depression. Although analysts agree more tough times are ahead for the markets, there is also some optimism.
They believe that the eight interest rate cuts and tax cuts so far this year, combined with billions of dollars in aid packages for businesses affected by the terrorist attacks, will eventually stimulate the economy.
“This is a difficult environment and it would be difficult for the market to put together several days of advance,” said Robert Streed, portfolio manager at Northern Select Equity Fund. “Still, I think there’s a very high probability that a month from now we’ll be higher.”
Declining issues narrowly led advancers 8 to 7 on the New York Stock Exchange. Volume was heavy at 1.6 billion shares.
The Russell 2000 index fell 6.40 to 389.78.
Overseas, Japan’s Nikkei stock average dropped 0.5 percent. European stocks fared better. Germany’s DAX index gained 2.2 percent, Britain’s FT-SE 100 rose 0.7 percent, and France’s CAC-40 advanced 1.9 percent.
Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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