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Stocks tumble below 8000 Original Source Link: (May no longer be active)
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CBS MarketWatch
Stocks tumble as UN's Blix talks tough about Iraq
Monday January 27, 12:02 pm ET
By Allen Wan
NEW YORK (CBS.MW) -- Stocks tumbled by early afternoon trade Monday after the chief United Nations weapons inspector said that Iraq hadn't given up its drive to develop weapons of mass destruction but urged that inspections be given more time.
The Dow Jones Industrial Average (CBOT:^DJI - News) slid 139 points, or 1.7 percent, to 7,992, while the S&P 500 Index (CBOE:^SPX - News) lost 1.6 percent to 847. The Nasdaq Composite (NasdaqSC:^IXIC - News) gave up 16 points, or 1.2 percent, to 1,325.
In a toughly worded assessment of Iraqi compliance, chief U.N. weapons inspector Hans Blix said Iraq has not yet accepted the U.N. demand to forsake weapons of mass destruction, but is cooperating "on the whole" with U.N. weapons inspectors.
Blix, chief of the U.N. team charged with determining whether Iraq has disarmed, told the U.N. Security Council that more work is needed to verify Iraqi compliance. Blix, pleading for more time, noted that many questions remain to be answered, including questions about Iraq's development of missiles and chemical and biological weapons. . Read Countdown to War.
The dollar rebounded against the euro after earlier falling for a 10th straight day against the euro, while gold pared earlier gains to stand modestly higher at just under $370. .
The Dow was bathed in red, with Honeywell (NYSE:HON - News) , Walt Disney (NYSE:DIS - News) and Home Depot (NYSE:HD - News) losing over 3 percent to lead decliners.
Dow stock SBC Communications (NYSE:SBC - News) was steady after analyst John Hodulik at UBS Warburg upgraded SBC and other regional bell operating companies like BellSouth (NYSE:BLS - News) and Verizon (NYSE:VZ - News) to "neutral" from "reduce" due to the recent "rapid" pullback in the stocks over the last few weeks. Goldman Sachs, however, lowered its 2003 earnings estimates for the telecom giant.
In the retail sector, Wal-Mart (NYSE:WMT - News) fell 0.4 percent after the company said sales in the latest week were within its forecast for growth of 2 percent to 4 percent.
Shares of Dow component J&J (NYSE:JNJ - News) sank 2.9 percent after it said late Friday that it would take a charge for the fourth quarter of 2002, after it was ordered to pay attorney fees and expenses to Amgen (NasdaqNM:AMGN - News) over a licensing disagreement. Amgen fell 2.5 percent.
Kimberly-Clark (NYSE:KMB - News) rose 0.8 percent after beating earnings expectations with a profit of 76 cents per share in the fourth quarter, down from 82 cents in last year's comparable quarter, but better than expectations of 72 cents. The consumer products giant also reported flat sales. Read Earnings Watch.
Shares of Tyson Foods (NYSE:TSN - News) dropped 9.3 percent after the meat processor reported slumping profits that missed Wall Street expectations.
Philip Morris (NYSE:MO - News) made its name change official. The food and tobacco behemoth is now Altria, parent of Kraft Foods and three other subsidiaries with the Philip Morris name. Shares fell 1.4 percent.
Overseas markets were also bearish on fears of an impending showdown with Iraq, with London's FTSE falling for a 11th straight day and markets in Germany and France sinking more than 3 percent. Tokyo's Nikkei's slid 1.4 percent. Read global markets.
With President Bush's State of the Union speech, a Fed meeting and a U.N. deadline on Iraq all scheduled for this week, investors better hope that bad news doesn't come in threes.
Even without these key events, it would be a busy week anyway. There's a flood of economic data, while the fourth-quarter earnings season hits it peak. Check out economic and earnings calendar.
Wither the dollar
Ashraf Laidi, chief currency analyst at MG Financial, thinks the dollar could undergo "renewed reverberations" if the U.S. releases documents revealing concrete violations by Iraq.
"The dollar could face renewed damage against the European currencies in the event that France and Germany step up their opposition to U.S. war intentions, and especially if such opposition gains more allegiance from the permanent Security Council members, namely China and Russia. This would further isolate the U.S. in the world arena and subject U.S. interests (in and outside the U.S.) to a menacingly escalating pattern of threats," said Laidi.
The dollar rebounded 1.1 percent versus the yen and 0.1 percent versus the euro, after being down as much as 0.3 percent and 0.8 percent, respectively, earlier in the session.
Spot gold rose 80 cents to $369.20, off a high of above $372 earlier. Crude prices edged higher, with Brent for March delivery up 9 cents to $30.58 a barrel n London's International Petroleum Exchange.
The Treasury market saw early flight-to-quality gains evaporate, leaving the market near even in a prelude to a week loaded with potentially market-moving events. A benchmark 10-year Treasury note fell 10/32 at 100 8/32 to yield 3.97 percent, up from 3.93 percent. A 30-year bond was off 8/32 at 107 18/32 to yield 4.88 percent, up from 4.86 percent.
Monday's lone economic data showed that housing market remains solid. Sales of existing homes rose about 5 percent in December, capping a record year for the industry, the National Association of Realtors said. In December, home resales rose to a seasonally adjusted annual rate of 5.86 million from November's revised level of 5.57 million. Economists were expecting sales around 5.62 million. In December, the average mortgage rate was 6.05 percent, the lowest since the mid-1960s.
Stocks to watch
Chip, hardware and software stocks were weak on the Iraqi news as well as less-than-upbeat comments by top industry officials about technology spending.
At the World Economic Forum's annual meeting in Davos, Switzerland, Microsoft (NasdaqNM:MSFT - News) founder and chairman Bill Gates was quoted by Reuters as saying on Sunday he did not expect a big pickup soon in technology spending. "This economy is fairly flat -- technology spending, there's no big uptick," he said.
Dell CEO Michael Dell and Cisco (NasdaqNM:CSCO - News) chief John Chambers also said at the forum that the market for technology spending was not showing signs of a major upturn this year. "It's OK, but not good," Dell said.
On Monday, Merrill Lynch's chief U.S. strategist Richard Bernstein said technology shares should remain "significantly underweighted" due to evidence that capital spending expectations may be too optimistic. Read pulse.
Microsoft fell 2.3 percent. Rival Oracle (NasdaqNM:ORCL - News) eased 1.2 percent despite a Barron's report which has CEO Larry Ellison saying that the company could reach 15 to 20 percent revenue growth, leading to an "explosion of profits."
Chip bellwether Intel (NasdaqNM:INTC - News) fell 1.1 percent, while PC giant Dell Computer (NasdaqNM:DELL - News) sank 1.9 percent.
Shares of trucking companies were driven higher by upgrades from Bear Stearns. Arkansas Best (NasdaqNM:ABFS - News) rallied 4.1 percent, while Roadway (NasdaqNM:ROAD - News) ran up 3 percent after analyst Edward Wolfe upgraded those stocks to "peer perform" from "underperform," as they have reached his downside price targets.
Bush speech
President Bush is expected to talk about Iraq at his State of the Union speech on Tuesday, but the economy will be a key focus as well.
In a preview of his speech, Bush said in a radio address Saturday that he will urge Congress to pass his economic stimulus package quickly. Besides tax-relief measures, the $670 billion plan calls for the elimination of corporate dividends. The Democrats have offered an alternative $141 billion plan.
In his column, Tomi Kilgore sees John Snow's confirmation hearings from Tuesday as another important event. With the dollar sliding, investors will look for any clues from the man picked to be the White House's spokesman to the financial markets. Read Kilgore's column.
On Wednesday, the spotlight will be on Greenspan and Co. as the Federal Open Market Committee concludes a two-day meeting with very little chance of an interest rate cut. Short-term futures contracts show that hedgers see a slimmer than 10 percent chance the Fed will trim rates.
Still, the meeting will be closely followed to see whether the Fed thinks there's a greater downside risk to the economy given the increasing likelihood of war.
It's too bad that Greenspan won't have more data to work with. One of the eagerly awaited reports of the week will be Thursday's gross domestic product data for the fourth quarter. CBS MarketWatch's consensus forecast is for growth of 0.8 percent in the quarter, a bit below the market's forecast for a 1 percent uptick. Check out economic data.
For data watchers, the action starts on Monday with existing home sales, followed by durable goods orders, new home sales and January consumer confidence on Tuesday. Besides GDP on Thursday, there's the employment cost index, while Friday will be a heavy day with personal income and spending, consumer sentiment and the Chicago purchasing managers.
Earnings galore
Investors will also be looking for any big earnings misses this week similar to the one from AT&T that knocked the market for a loop. So far, fourth-quarter earnings have been as good as expected, but when they haven't -- as in the case of Eastman Kodak and AT&T -- investors have punished those stocks. One ominous trend is the growing number of companies that aren't providing guidance anymore, such as Sun Microsystems, McDonald's and Coca Cola.
Dow components Dupont ( DD : news , chart , profile ), Procter & Gamble ( PG : news , chart , profile ), SBC ( SBC : news , chart , profile ) and Merck ( MRK : news , chart , profile ) weigh in on Tuesday, along with Kraft ( KFT : news , chart , profile ), United Parcel Service ( UPS : news , chart , profile ), and Xerox ( XRX : news , chart , profile ). Dow component Philip Morris ( MO : news , chart , profile ) reports earnings on Wednesday, along with AOL Time Warner ( AOL : news , chart , profile ) and Verizon ( VZ : news , chart , profile ). On Thursday, Dow components Disney ( D : news , chart , profile ), ExxonMobile ( XOM : news , chart , profile ) post quarterly earnings, along with Royal Caribbean ( RCL : news , chart , profile ), Gillette ( G : news , chart , profile ), CSX ( CSX : news , chart , profile ) and Dow Chemical ( DOW : news , chart , profile ).
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