NEW YORK (AP) - Stocks fell sharply Friday after a series of depressing
economic and corporate reports as well as high oil prices stoked concerns about
the health of the economy. The major stock indexes fell more than 2.5 percent
and the Dow Jones industrials lost 315 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 due
next week had its weakest showing in more than six years.
Oil prices continued to stir concern about inflation after pushing past $103
per barrel for the first time.
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. "We just ran out of gas this
week."
Hogan said while stocks held up admirably early in the week amid an uneven
flow of economic news, they couldn't hold their gains after the latest round of
weak economic signals.
The Dow fell 315.79, or 2.51 percent, to 12,266.39.
Broader stock indicators also tumbled. The Standard & Poor's 500 index lost
37.05, or 2.71 percent, to 1,330.63, and the Nasdaq composite index declined
60.09, or 2.58 percent, to 2,271.48.
For the week, the Dow lost 0.93 percent, while the S&P 500 gave up 1.66
percent and the Nasdaq fell 1.38 percent. The week's losses would have been
steeper had stocks not risen early in the week on hopes many of Wall Street's
credit troubles were easing and after IBM Corp. announced a sizable stock
repurchase plan.
Friday's losses sent stocks lower for February, the fourth straight month of
declines.
Bond prices rose sharply as stocks lost ground. The yield on the benchmark
10-year Treasury note, which moves opposite its price, fell to 3.53 percent in
late trading 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 12.8 percent.
The dollar hit another low against the euro and slid to a three-year record
against the yen. The fall in the dollar has sent prices of commodities such as
oil and gold soaring.
Light, sweet crude jumped to a record of $103.05 in early electronic trading
before settling down 75 cents at $101.84 a barrel on New York Mercantile
Exchange.
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 $3.29, or 6.6 percent,
to $46.86.
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 97 cents, or 4.7 percent, to $19.90.
Bill Schultz, chief investment officer at McQueen, Ball & Associates in
Bethlehem, Pa., 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.
Schultz 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 didn't 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 $2.87, or 12.6 percent, to $25.65.
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 brought further
worries 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 roughly 7 to 1 on the New York
Stock Exchange, where consolidated volume came to 4.23 billion shares compared
with 3.76 billion shares traded Thursday.
The Russell 2000 index of smaller companies fell 19.54, or 2.77 percent, to
686.18.
Overseas, Japan's Nikkei stock average closed down 2.32 percent. Britain's
FTSE 100 lost 1.36 percent, Germany's DAX index fell 1.67 percent, and France's
CAC-40 gave up 1.53 percent.
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The Dow Jones industrial average ended the week down 114.63, or 0.93
percent, at 12,266.39. The Standard & Poor's 500 index finished down 22.48, or
1.66 percent, at 1,330.63. The Nasdaq composite index ended the week down 31.87,
or 1.38 percent, at 2,271.48.
The Russell 2000 index finished the week down 9.25, or 1.33 percent, at
686.18.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index
that measures 5,000 U.S. based companies -- ended Friday at 13,455.96, down
207.07 points, or 1.52 percent, for the week. A year ago, the index was at
14,271.61.
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