Stocks fall as economy concerns grow
EmptyNEW YORK -- Stocks fell sharply Friday after a series of economic and earnings reports and a further rise in oil prices stoked concerns about the health of economy. The Dow Jones industrial average fell more than 200 points, or more than 1.5%.
Investors grew unnerved by weak quarterly showings from American International Group Inc. and Dell Inc. An index of regional business activity that Wall Street regards as a precursor to a report due next week registered its weakest reading in more than six years.
Adding to Wall Street's list of worries, oil prices continued to stir concern about inflation after topping $103 per barrel overnight for the first time.
While stocks made sharp gains in the first three days this week even amid some lackluster economic readings, the litany of concerns investors succumbed to Friday offered a fresh look at 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.
Hogan said while stocks had managed impressive gains for much of the week Fridays have remained difficult for Wall Street in the past year or so since cracks began to appear in the credit markets and as concerns have emerged about the prospects for the economy.
In the late morning trading, the Dow fell 204.83, or 1.63%, to 12,377.35.
Broader stock indicators also fell. The Standard & Poor's 500 index dropped 23.44, or 1.71%, to 1,344.24, and the Nasdaq composite index fell 40.79, or 1.75%, to 2,290.78.
Bond prices rose sharply as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.58% from 3.67% late Thursday.
The euro traded at $1.5188 in London, after reaching new highs on Thursday. The slide in the dollar has sent commodities prices soaring, and on Friday briefly took oil above $103 a barrel for the first time.
Light, sweet crude slipped 17 cents to $102.42 on the New York Mercantile Exchange.
Over all, stocks have performed better in February than in January, when credit market turmoil took a heavy toll on the major averages. But disappointing earnings results released late Thursday cast a pall over the market and cause stocks to end the month on a wary note.
Insurer AIG announced a $5.29 billion quarterly loss and took a massive charge to account for its exposure to credit derivatives. The loss caught analysts off guard, as many had expected the company to report a profit.
Computer maker Dell had a 6% decline in quarterly profit, falling below analysts' expectations, and warned that its business could suffer from reduced customer spending.
AIG was the steepest decliner among the 30 stocks that make up the Dow industrials, falling $3.37, or 6.7%, to $46.78. Dell slipped 46 cents, or 2.2%, to $20.41.
Wall Street's pullback comes a day after stocks sank as investors fretted over a rise in unemployment claims and the prospect of more bank failures. Federal Reserve Chairman Ben Bernanke warned that while large U.S. banks will likely recover from the recent credit crisis, other banks are at risk of failing.
Some relief for the ailing bond insurance industry is on the way. Billionaire investor Wilbur Ross agreed to invest up to $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd.
Assured does not have as much exposure to bad subprime debt as some of its rivals, but the deal still shows investors are willing to pump capital into an industry where troubles have hurt many classes of normally stable debt. Assured Guaranty rose $3.18, or 14%, to $25.96.
In economic news, the Chicago purchasing managers index for this month came in at 44.5, a weaker reading than the 48.5 that had been expected, according to Dow Jones Newswires. The report indicated the factory sector is shrinking in that region. The figure is seen as a precursor of the national Institute for Supply Management report due out Monday.
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.
A government report that personal spending, on an inflation-adjusted basis, was unchanged in January provided further evidence of a consumer pullback that could further weaken the economy.
There also was nervousness about what impact the recent slide in the dollar and robust rally in commodities -- including a jump in crude oil prices to $103 a barrel -- will have on the economy and companies.
A closely watched gauge of consumer inflation posted a 0.4% increase in January and was up 3.7% over the past 12 months, the biggest year-over-year gain since 1991. This result will intensify worries that inflation is accelerating even as the economy slows.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 440.6 million shares.
The Russell 2000 index of smaller companies fell 11.90, or 1.69%, to 693.20.
Overseas, Japan's Nikkei stock average closed down 2.32%. In afternoon trading, Britain's FTSE 100 fell 1.46%, Germany's DAX index fell 2.03%, and France's CAC-40 fell 1.63%.