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Stocks Fail to Bounce Back

The market's early rally fizzles as airline, auto, drug shares bear brunt of investors' retreat.

March 12, 2003|From Times Staff and Wire Reports

Rally attempts failed on Wall Street on Tuesday, leaving major indexes lower for the fifth time in seven sessions as war concerns continue to dominate.

Trading volume picked up from the recent sluggish pace, but it didn't help the bulls. Airlines, auto and drug stocks led the decline.

The Dow Jones industrial average gave up a 74-point rally to close down 44.12 points, or 0.6%, at 7,524.06, after tumbling 171.85 points Monday.

The Dow is down nearly 10% year to date and is closing in on its five-year low of 7,286.27 reached Oct. 9.

The Nasdaq composite, which lost 26.92 points Monday, dipped 6.90 points, or 0.5%, to 1,271.47. It is off 4.8% this year.

Fears that a U.S.-Iraq conflict is inevitable have buffeted markets for weeks. On Tuesday, the United States appeared willing to give diplomacy a bit more time to avoid war, but White House officials still said they would push for a United Nations vote this week on an ultimatum for Iraq.

Some investors may have been disheartened after Defense Secretary Donald H. Rumsfeld hinted that the British forces might not take part in an initial invasion of Iraq. He later backtracked on those remarks.

British Prime Minister Tony Blair has faced heated opposition at home to British involvement in a war unless it is sanctioned by the United Nations.

Investors worldwide have fled stocks for the perceived safety of government bonds in recent weeks.

On Tuesday, the stock sell-off slowed in Europe, where markets have been hard hit. The German market fell 1%, but the British market added 0.5%, and the Spanish market was up 0.7%.

In Tokyo, however, the Nikkei-225 index closed down 2.2% at a 20-year low of 7,862.43.

The rally in U.S. Treasury bonds stalled out. The yield on the two-year T-note rose to 1.37% from Monday's generational low of 1.33%.

The 10-year T-note yield edged up to 3.58% from Monday's 45-year low of 3.56%.

Analysts said investors who have been buying bonds at current yields were concerned not just about war, but that the economy would be slowing even without the war threat. A "double-dip" recession could send the stock market reeling and drive interest rates even lower, experts said.

"It is a slow recovery at best; we are way underperforming," Treasury Secretary John Snow told a banking group in Washington.

On Wall Street, falling stocks outnumbered winners by 19 to 13 on the New York Stock Exchange and 17 to 14 on Nasdaq.

Although major indexes ended just modestly lower, given Monday's "dramatic decline, today's lack of a bounce is really not inspiring at all," said Jim Russell, director of core equity strategy for Fifth-Third Bank in Cincinnati.

Among Tuesday's highlights:

* Ford Motor shares slid 39 cents to a 10-year low of $6.60 after a Goldman Sachs analyst said weakening U.S. auto sales would hit the company harder than rivals. GM dropped 76 cents to $29.92; DaimlerChrysler was off 64 cents to $27.39.

* Battered airline stocks fell further on fears that the industry's losses will balloon. Delta slid $1.91 to $6.75, Alaska Air fell $1.15 to $17.25, and Continental dropped 75 cents to $4.23.

* Major drug stocks lost ground after AstraZeneca said U.S. regulators were probing the company's marketing of ulcer drugs. AstraZeneca fell 51 cents to $30.75, Eli Lilly dropped $2.30 to $53.70, and Bristol-Myers Squibb was off $1.01 to $21.50.

* Insurance firm UnumProvident continued to dive, off $2.03 to $5.97, on concerns about the level of corporate junk bonds in its investment portfolio.

* Gold mining stocks were slammed, extending recent losses, as near-term gold futures in New York fell $4.20 to $350.50 an ounce. Newmont Mining sank 41 cents to $24.75, its lowest since December, and Glamis Gold slid 45 cents to $9.40, also a three-month low.

* On the plus side, Pasadena-based Avery Dennison surged $3.06 to $55.01 after brokerage firm Morgan Stanley raised its recommendation on the adhesives company's shares to "overweight" from "equal-weight."

Market Roundup, C6-7

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