Stocks stumbled to a mixed finish Tuesday in the final trading session of 2002, as investors closed the books on a disappointing year. An unexpected decline in consumer confidence jolted markets early in the session, but year-end portfolio adjusting lifted the major indexes by Tuesday's closing bell. Trading volume was light in advance of the New Year's holiday and with investors still nervous about geopolitical tension.
"We're ending the year in a market dominated by apathy and anxiety," said Alan Ackerman, market strategist at Fahnestock. Concerns about corporate earnings and political tension weighed heavily on investors' minds, but Ackerman expected fundamentals to improve in the New Year. "January ought to give us a slight respite from the selling pressure we've endured through December."
The Dow Jones Industrial average finished Tuesday's session ahead 8.78 points, or 0.11%, to 8,341.63. For the year, the Dow lost 17%. The broader Standard & Poor's 500-stock index ticked ahead 0.43 points, or 0.05%, to 879.82--a 23% loss for the year. The tech-heavy Nasdaq composite index suffered the biggest loss--32%--in 2002. On Tuesday, the Nasdaq lost 4.04 points, or 0.30%, to close at 1,335.50.
Stocks marked their third consecutive losing year in 2002, the first three-year losing streak since 1939-1941. The Dow turned in its worst December performance since 1931.
Investors received bad economic news Tuesday morning. The Conference Board consumer confidence index was 80.3 for December, down from 84.9 in November. A slight increase was expected. The lagging consumer confidence data comes on the heels of relatively lackluster existing home sales and Chicago Purchasing Management Index (PMI) data Monday.
U.S financial markets will be closed Wednesday, Jan. 1, for the New Year's holiday. On Thursday, investors anticipate the Institute of Supply Management's nationwide manufacturing survey.
The consumer confidence data impacted already-reeling retail stocks. No. 1 retailer Wal-Mart (WMT) slipped slightly. Shares of competitor Target (TGT) rallied to close unchanged after the company said last week's sales were better than expected, but not good enough to offset a poor month of December.
After Monday's close, scandal-plagued industrial conglomerate Tyco (TYC) said an internal investigation uncovered $380 million in accounting errors, but no fraud. Tyco stock rose 11% on the news.
Also on the upswing was computer giant IBM (IBM). Shares in Big Blue rose 1.6% Tuesday, amid a report from a SoundView analyst that the company would beat consensus fourth-quarter earnings estimates.
Helping the Dow recover from earlier losses, along with IBM, were Honeywell (HON), with a gain of 6.81%, and McDonald's (MCD), which advanced 2.1%.
Software maker Ariba (ARBA) said it would restate 2001 earnings and delay its 2002 annual report. The restatement pertains to a $10 million payment from one executive to another. Ariba's stock price slipped 4.6% Tuesday.
Another stock slipping Tuesday was cigarette maker Philip Morris (MO). Morgan Stanley reduced its 2003 earnings estimates and price target for the Dow component. The shares fell 2%.
On the commodities front, oil prices continued to cool off as OPEC discussed increasing production. On Monday, oil prices had spiked to more than $33 per barrel--a two-year high.
According to S&P's Marketscope, the drop-off in oil prices negatively affected oil and gas stocks, which enjoyed a run-up in recent days.
U.S. Treasury prices ended slightly down Tuesday in a holiday-shortened session. Prices had risen sharply Tuesday morning as investors reacted to an unexpected drop in consumer confidence, but fell "thanks to month- and year-end booksquaring, as well as some last minute institutional selling at the very end of the shortened session," according to economic research firm MMS International.
The benchmark 10-year note's yield was 3.82 percent, down 1.21 percentage points on the year.
European markets ended higher in low volume trading. News of waning consumer confidence in the U.S. pared gains in late trading. In London, the Financial Times-Stock Exchange 100 index gained 39.80 points, or 1.02%, to 3,940.40--finishing the year down 23%. In France, the CAC 40 finished up 38.77 points, or 1.28%, to 3,063.91. But for the year, the average skidded 33.8%. Monday was the last day of 2002 trading for the Frankfurt DAX index. On Monday, the DAX Index finished higher by 52.63 points, or 1.85%, to 2,892.63.
In Japan, the Nikkei 225 index was closed for the New Year. On Monday, the Nikkei dropped 135.10 points, or 1.55%, to close at 8,578.95, down 19% in 2002. In Hong Kong Tuesday, the Hang Seng index gained 48.96 points, or 0.53%, to close at 9,321.29.