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STOCKS DECLINE AS INVESTORS REACT TO ECONOMIC NEWS

Pessimism pervaded Wall Street as investors today reacted to the latest bad news about the economy: higher-than-expected inflation numbers.

Stocks dipped after the government reported the biggest increase in consumer prices in 10 months. Analysts said the news added to -- but didn't overshadow -- the existing anxiety about when company profits will improve.

At 1 p.m., the Dow Jones industrial average slid 26.56 to 10,704.32. The tech-focused Nasdaq composite index gained 22.27 to 2,340.62, and the Standard & Poor's 500 index advanced 1.41 to 1,280.35.

The volatility came after the Labor Department reported the biggest increase in its Consumer Price Index in 10 months, chiefly because of gains in natural gas and electricity. There also was a small increase in health-care costs.

"In the current circumstances, these numbers are not as big a deal," said Merrill Lynch chief economist Bruce Steinberg. "The economy is weak and you just don't get inflation developing in these circumstances."

Still, financial stocks struggled, pulled lower by banker J.P. Morgan Chase, down $1.25 at $48.70.

Investors also punished technology stocks. Dow component IBM fell $2.29 to $109.21, while Sun Microsystems dropped $1.83 to $20.42 on a downgrade from investment firm Merrill Lynch.

Energy stocks, which are viewed as safer investment in a weak economy, fared better. Enron rose 21 cents to $75.30, while Duke Energy gained 53 cents to $42.64.

Analysts said investors still remain unconvinced about that the Fed is doing enough to stimulate the sluggish economy. The agency expected to cut interest rates next month -- in what would be its third such move this year -- but Wall Street is no longer sure the action is doing enough to spark growth.

The higher-than-expected inflationary numbers caught many market watchers off guard, although many agree that, at least for now, the numbers appear to be an aberration, rather than the beginning of a trend.

Agilent Technologies fell $3.69 to $40.31. The maker of test and measurement-equipment maker cut its forecast for revenue growth to between 10 percent and 15 percent for the fiscal year ending in October from 20 percent it projected in November.

Also, shares of Coca-Cola dropped $3.11 to $55.36, a 5 percent decline, after Goldman Sachs downgraded the stock. Coca-Cola announced this morning it was forming a new juice and snack company with Procter & Gamble. P&G was up 47 cents at $46.18.

Separately, Coke and Procter & Gamble, the largest U.S. household products company, said they will are combining their juices and snacks into a joint venture to boost sales of brands such as Sunny Delight, Minute Maid and Pringles.

VA Linux Systems fell $1.47 to $5.78 after the computer and software maker reported a wider-than-expected quarterly loss. The maker of computers and software based on the Linux operating system will cut its work force by 25 percent and take a third-quarter restructuring charge.

Sprint Corp. fell $1.70 to $20.90. Deutsche Telekom AG and France Telecom SA will be selling most, if not all, of their 152 million-share stake in the No. 3 U.S. long-distance telephone company, according to a regulatory filing.

Abercrombie & Fitch rose $1.70 to $29.60. The clothing retailer said fourth-quarter profit was 76 cents a share in the period ended Feb. 3, exceeding analysts' estimates by 2 cents. The company said profit in the third and fourth quarters is forecast to grow in the "double digits."

Intuit rose $3.30 to $35.98 after the maker of personal-finance software maker said second-quarter net income fell less than forecast. The personal-finance software maker said it earned 48 cents a share in the fiscal second quarter, excluding certain costs, 3 cents better than analysts expected.

Conseco rose 23 cents to $14.09. The life insurer said it earned 13 cents a share from operations in the fourth quarter. Analysts had forecast 8 cents.

Finisar plunged $4.44 to $13.63. The maker of fiber-optic equipment for high-speed computer networks lowered its sales and profit forecast for fiscal 2001 and 2002. The company had a third-quarter loss of 14 cents a share.

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