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Stocks Fall for 3rd Straight Session

Positive economic news fails to ease investors' concerns about possible war with Iraq and the threat of terrorism.

February 14, 2003|From Times Wire Reports

A late rally Thursday couldn't prevent a third straight losing session for stocks as reports of rising retail sales and falling jobless claims failed to ease concern that a possible war with Iraq would slow the economy. Consumer shares such as Wal-Mart Stores led the decline.

"The economy, if you took Iraq out of the picture, is in recovery," said portfolio manager Allan Meyers of Fifth Third Asset Management. "In order to mount a sustained rally, something will have to come to fruition in Iraq."

After falling as much as 129 points, the Dow Jones industrial average closed down 8.3 points, or 0.1%, at 7,749.87. The Standard & Poor's 500 index fell 1.31 points, or 0.2%, to 817.37. The technology-laced Nasdaq composite index lost 1.53 points, or 0.1%, to 1,277.44.

Losers outnumbered winners by almost 3 to 2 on the New York Stock Exchange and Nasdaq in active trading.

Stocks rose initially in response to the economic data before retreating. The government reported that retail sales, excluding automobiles, rose more than expected in January. Requests for unemployment benefits fell last week to 377,000, less than the average forecast.

Stocks recouped the bulk of their losses during the last 90 minutes of trading. Nevertheless, the decline marked the second time in less than a week that prices fell even as economic indicators exceeded forecasts.

On Friday, share prices surged on a report showing unemployment unexpectedly dropped in January, only to turn lower when the government raised its domestic terrorism threat indicator to the second-highest level.

The S&P 500 now is down 7.1% in 2003, after climbing as much as 5.9% the first two weeks of the year. Mounting concern that the U.S. will attack Iraq is the main culprit, although terrorism fears also have weighed heavily in recent days.

"It's scary and unsettling," said John Orrico, manager of the Arbitrage Fund. "People are focused on the risks associated with a terror attack and there are worries that people will stay at home to wait this out, not do as much shopping, and that will affect the economy."

Tension about a possible attack was heightened Thursday when police closed a terminal at London's Gatwick Airport after stopping a man carrying a live hand grenade, and when New York's Brooklyn-Battery Tunnel was closed while a suspicious package was investigated.

Other markets also reflected geopolitical concerns. Oil, which has jumped more than 40% in three months, surged above $36 a barrel for the first time since October 2000, rising 59 cents to $36.36 in New York trading. And gold regained its footing after recent losses, adding $4.80 to $357.40 an ounce.

The dollar, meanwhile, fell against the euro and the Japense yen, and Treasury yields fell as investors sought the relative security of U.S. government debt. The yield on the benchmark 10-year Treasury note fell to 3.88% from Wednesday's close of 3.91%, and the yield on the two-year T-note slid to 1.56%, its lowest level in five decades, according to Bloomberg News.

Among the day's highlights:

* Consumer-oriented stocks slid on concerns that war-spooked Americans are cutting back on spending. Wal-Mart, the world's biggest retailer, slipped 21 cents to $47.64; Procter & Gamble, the largest maker of household products, shed 62 cents to $82.70; and Viacom, the third-biggest U.S. media company, fell 41 cents to $36.14.

* Johnson & Johnson, the biggest medical device maker, rose $1.31 to $51.31. The company's drug-coated stent probably will win Food and Drug Administration approval within the next month, government officials said.

* Qualcomm slid $2.65 to $33.91. The maker of mobile-phone chips dropped on concern it may lose sales to Intel, which is introducing a cell-phone chip that combines computing, memory and signal functions. Intel gained 38 cents to $15.53.

Market Roundup, C6-7

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