Dow drops 135 as Mideast, interest rates worry investors
By Michael J. Martinez AP Business Writer
NEW YORK (AP) – Rising concern over violence in the Middle East gave investors yet another reason to sell Wednesday, sending the Dow Jones industrial average down 135 points despite another batch of solid earnings reports.
With the growing possibility of higher interest rates an ongoing concern on Wall Street, analysts said investors already inclined to pull money out of the market were further unnerved by developments in the Middle East.
“I think the quagmire of geopolitical news is basically what’s keeping the market from responding to the good economic news and good earnings reports,” said Peter Cardillo, chief strategist at S.W. Bach & Co.
According to preliminary calculations, the Dow plunged 135.56, or 1.3 percent, to 10,342.60.
Broader stock indicators also dropped sharply. The Standard & Poor’s 500 index was down 15.70, or 1.4 percent, at 1,122.41, and the Nasdaq composite index fell 42.99, or 2.1 percent, to 1,989.54.
An attack in Syria that killed four people Tuesday and the continuing violence in Fallujah, Iraq intensified the foul mood that has sent stocks lower for more than two weeks. Investors have been largely obsessed with the prospect of higher interest rates, selling on positive economic news and ignoring companies’ generally strong earnings.
Investors were also making no bets while they awaited upcoming data to help them assess the speed of the economic recovery. The first-quarter gross domestic product report was due out Thursday, the Federal Reserve was set to meet Tuesday to discuss rates, and the April employment data was expected next Friday.
“If the data shows that the economy is heating up too quickly, that’ll prompt the Fed to raise rates more quickly and more forcefully than investors would like,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC. “So right now, when things are as good as they can be, and earnings are strong as they are now, that’s the time you want to be cautious and take a contrarian viewpoint.”
With Wednesday’s loss, the major indexes erased the gains made over the past four sessions. The selloff hit nearly every sector, with only utilities posting modest gains.
Boeing Co. swung to a profit in the first quarter, led by growth in its defense business. The company, which climbed 48 cents to $44.03, also upped its annual earnings forecasts based on an expected increase in commercial aircraft deliveries.
Comcast Corp. executives said a lack of interest from the Walt Disney Co.’s board led Comcast to drop its bid for the entertainment conglomerate, which some analysts said undervalued Disney’s holdings. Comcast also posted earnings of 3 cents per share for the quarter. Comcast was up 23 cents at $30.20, while Disney dropped 34 cents to $23.84.
Pharmaceutical company Bristol-Myers Squibb rose 71 cents to $25.43 as it reported earnings that beat expectations by 2 cents and reaffirmed its forecasts for the year.
McDonald’s Corp.’s comeback, launched by its late chief executive, Jim Cantalupo, continued to fuel earnings at the fast-food giant. McDonald’s posted a 56 percent increase in earnings from a year ago, meeting Wall Street expectations. McDonald’s gained 41 cents to $27.61.
Nortel Networks Corp. was down $1.60, or 28 percent, at $4.04 after it fired its chief executive, chief financial officer and comptroller in an accounting scandal. The company’s first quarter earnings will be delayed, and it will also review and possibly restate its 2003 earnings as well. down
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 1.85 billion shares, compared with 1.51 billion at the same point Tuesday.
The Russell 2000 index of smaller companies fell 13.70, or 2.3 percent, to 577.06.
Overseas, Japan’s Nikkei stock average slipped 0.3 percent. Britain’s FTSE 100 closed down 1.1 percent, France’s CAC-40 fell 1.6 percent for the session, and Germany’s DAX index was down 1.7 percent.
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AP-ES-04-28-04 1634EDT