Sun, Jul 16, 2006 - Page 10 News List

US stocks tumble amid rising geopolitical concerns

AFP , NEW YORK

US stocks took a tumble over the past week as an upsurge in violence in the Middle East, record oil prices and some lackluster economic news buffeted Wall Street's confidence.

Stocks, especially technology issues, plummeted amid rising geopolitical concerns, with the international standoff over Iran's nuclear program also denting investors' optimism.

The Dow Jones Industrial Average lost 3.17 percent over the week, closing at 10,739.35 on Friday, while the technology-stacked NASDAQ composite fell by a bigger 4.35 percent to 2,037.35.

The broad-market Standard & Poor's 500, meanwhile, shed 2.31 percent on the week to 1,236.20.

The US indexes lost ground -- as did other major share markets around the world -- amid a deepening of the Middle East crisis which saw Israel launch a wide-ranging military offensive against Lebanon.

Israel's widened its onslaught after Hezbollah guerrillas kidnapped two soldiers and also fired rockets deep into northern Israel. Civilians have been killed on both sides of the Israeli-Lebanon border.

"It's very reminiscent of what went on back in the first Gulf war in 1990 when the scud missiles were hitting Israel and every time they showed that on CNN the market would drop 50 points," said Mace Blicksilver, an analyst at Marblehead Asset Management.

The Dow is up 0.20 percent for 2006, but the the S&P 500 is down 0.97 percent, and the NASDAQ is off a sharper 7.62 percent.

"I don't think the market was close to understanding how quickly the situation with Lebanon would escalate. It became a major issue. We haven't really focused on [corporate] earnings," said Marc Pado, an analyst at Cantor Fitzgerald.

Skyrocketing oil prices have also dampened Wall Street's enthusiasm, as crude prices in New York closed out the week just over US$77 a barrel.

Economists worry that a strong run up in oil prices could slow the US economy which is the world's biggest energy importer.

A major question for Wall Street is whether the market will be able to look past the global hot spots and focus on economics and corporate news at home.

Aside from geopolitical events, US economic news in recent days has been lackluster as the market awaits reports in the coming week on industrial production, inflation, and housing starts.

Some analysts say the market is expected to recover as it has from other crises.

"Will the economy achieve a soft landing and continue to grow, or is the Federal Reserve in the process of stepping on the brakes so aggressively that we face a recession in 2007?" asked AG Edwards chief market strategist Al Goldman.

"Despite all of the world problems, our 'turtle' stock market can plod upward if the economy keeps its head above water, and this question is bugging investors today," he said.

The bond market gained marginally as jittery investors sought a safe haven for their cash.

Yields on the 10-year Treasury bond fell to 5.059 percent from 5.132 percent a week earlier while the 30-year bond yield declined to 5.111 percent from 5.174 percent.

Bond yields and prices move in opposite directions.

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