Sun, Dec 29, 2002 page10

• S&P, Dow at lowest level since October

  • BLOOMBERG
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  US stocks dropped, sending the Standard & Poor's 500 Index and Dow Jones Industrial Average to their lowest in more than two months, amid concern higher oil prices will crimp spending by companies and consumers.

  General Electric Co led the decline as all 30 members of the Dow fell. Financial stocks including Citigroup Inc. contributed a quarter of the S&P 500's drop after securities executives said the industry may extend its slump.

  Diplomatic disputes with Iraq and North Korea and signs corporate profit growth is slowing also deterred investors. The S&P 500 and Dow are heading to their worst December since 1931, capping their first three-year losing streak in six decades.

  "There's a lot of news out there that sounds pretty bad," said Todd Trautman, who helps manage US$4 billion at First National Bank of Omaha. "It's a good opportunity for people to take some money off the table."

  He has reduced his stake in consumer stocks including Newell Rubbermaid Inc.

  The S&P 500 declined 14.26, or 1.6 percent, to 875.40, the lowest since Oct. 16. The Dow reached its lowest since Oct. 17, falling 128.83, or 1.5 percent, to 8,303.78. The NASDAQ Composite Index slid 19.58, or 1.4 percent, to 1,348.31.

  So far this month, the S&P has dropped 6.5 percent and the Dow 6.7 percent. The NASDAQ has slumped 8.8 percent.

  Today, more than two stocks fell for every one that rose on the New York Stock Exchange. Trading totaled 757 million shares, half the daily six-month average and the second-slowest full session this year. Friday's was the slowest.

  Higher crude-oil prices hurt plastics and chemicals companies, which use oil as a raw material. The price of crude rose to US$32.76 a barrel, the highest since Nov. 30, 2000, in New York trading. Crude has gained 65 percent this year.

  "Everyone's been hoping it'd break and come down the other way, but it hasn't and that adds to the nervousness," said Donna Van Vlack, head trader at Brandywine Asset Management, which oversees US$8 billion in Wilmington, Delaware.

  General Electric, whose plastics unit supplies the automotive and computer industries, shed US$0.60 to US$24.70. It was the biggest drag on the S&P 500.

  Dow Chemical Co, the largest US chemical company, lost US$1.09 to US$29.11. Hercules Inc, the world's largest maker of chemicals for papermaking, slumped US$0.51 to US$8.67.

  Financial-services companies declined after industry executives said there will be fewer bankers a year from now as Wall Street suffers from a two-year revenue plunge of 40 percent.

  "The odds are we've got another tough year ahead of us," Stephan Newhouse, co-president of Morgan Stanley's institutional securities business, said.

  Citigroup, the world's biggest financial company, dropped US$0.85 to US$35.17. For the week, it declined 7.8 percent, the most in the Dow. Costs to cover loan losses and legal settlements will shave its quarterly earnings by US$1.5 billion.

  Morgan Stanley declined US$1.35 to US$40.13. JP Morgan Chase & Co, which plans to cut stock options for most employees by more than half as a result of falling earnings, lost US$0.65 to US$23.80. Goldman Sachs Group Inc dropped US$1.63 to US$67.92.

  "They still need to cut costs," said Edward Maraccini, who helps manage US$500 million at Johnson Asset Management in Racine, Wisconsin. "That might mean another round of job cuts just so they can get leaner and more efficient."

  Securities firms have pared 68,000 jobs in the US since the end of 2000.

  Retailers dropped on concern that rising oil prices may channel more of people's incomes into gasoline and fuel. Of the 30 companies in the S&P 500 Retailing Index, 26 fell. The index has lost 11 percent this month.

  Wal-Mart Stores Inc, which this week said its December sales lagged forecasts, slipped 60 cents to US$49.16. Home Depot Inc, which last month reported its slowest quarterly growth in at least 12 years, shed US$0.42 to US$23.77.

  Amazon.com Inc fell US$1.44 to US$18.86. Even after slumping 14 percent the past two days, the biggest Internet retailer has gained 74 percent this year, the most in the NASDAQ 100.

  Broader indexes declined for a third week in four. The S&P 500 lost 2.3 percent this week, the Dow 2.4 percent, and the NASDAQ 1.1 percent.

  Corporate profits are expected to rise 13 percent in the fourth quarter and slow to 12 percent in the first quarter, according to the average analyst estimate complied by Thomson First Call. That's down from predictions of 20 percent and 16 percent growth for the periods on Oct. 1.

  Unocal Corp dropped US$1.53 to US$30.12. The second-largest US independent oil company cut its fourth-quarter profit forecast, saying oil and gas prices didn't rise as much as it expected.

  Silicon Storage Technology Inc shed US$0.26 to US$3.94. The maker of computer-memory chips said fourth-quarter losses will be wider than its previous estimate after prices for its products fell more than expected.

  For your information

  Major markets

  * The S&P 500 declined 14.26, or 1.6 percent, to 875.40. * The Dow reached its lowest since Oct. 17, falling 128.83, or 1.5 percent, to 8,303.78. * The NASDAQ Composite Index slid 19.58, or 1.4 percent, to 1,348.31.
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