Stocks ended down on Monday as investors fretted over threats of more terrorism after a supposed statement from al Qaeda vowed more attacks on the U.S. and its allies. But the major indexes were able to finish well off their worst levels of the session.
The Dow Jones industrial average pulled back 57.85 points, or 0.59% to 9,710.83, after posting a triple-digit loss for most of the day. The Nasdaq was down 20.65 points, or 1.07%, to 1,909.61. The broader Standard & Poor's 500 index fell 6.72 points, or 0.64%, at 1,043.63.
On Tuesday, investors will have more profit news to review including results from technology firm Analog Devices (ADI ), office supply firm Staples (SPLS ) and home improvement retailer Home Depot (HD ).
In economics news, investors are awaiting word on inflation on the retail level in October. It is expected to be muted with the Consumer Price Index expected to tick up just 0.1% after a 0.3% increase in September, according to economic research firm MMS.
Investors on Monday sold stocks after a statement, supposedly from an al Qaeda unit published in a London-based Arab newspaper, claimed responsibility for bombs at two Istanbul synagogues that killed at least 23 people over the weekend.
The statement also threatened other countries including the U.S., Australia, Japan, Italy, and Britain.
Stocks were also hurt by the escalating mutual funds scandal that is "driving many out of equities", according to S&P MarketScope.
In economic news, U.S. business inventories, projected to be mostly flat or slightly lower, were up 0.3%, after a 0.4% drop in August. Sales rose 0.6% after a falling 0.3% in August. The inventory-to-sales ratio held steady at 1.36.
"While the stock market continues to hover near 52-week highs, concerns about valuations and a possible rate hike down the road have limited further gains," says MMS International senior economist Rick MacDonald in a weekly financial note. "Overall, it will be interesting to see how the bullish outlook for a strong economy and earnings interacts with Fed fears, geopolitical risk, the growing mutual fund trading scandal, and valuation concerns into year-end."
In company news, Sun Microsystems (SUNW ) is expected to announce an alliance with Advanced Micro Devices (AMD ) that's aimed at helping the companies fight off larger rivals, according to The Wall Street Journal.
In insurance news, Travelers Property and Casualty (TAP.B ) has agreed to be acquired by St. Paul Companies (SPC ) in a deal valued at about $16 billion. The terms of the deal call for Travelers shareholders to receive 0.4334 St. Paul common share per Travelers share.
News about market timing in mutual funds continued. Charles Schwab's (SCH ) CEO, David Pottruck, said in an email to employees that an internal investigation revealed evidence of market-timing arrangements, and late trading.
Meanwhile, Alliance Capital Management Holding (AC ) says it has recorded a $190 million third-quarter charge to cover the restitution, litigation, and other costs related to the internal investigation of market timing in mutual funds. The company also announced related resignations.
Oilfield-services outfit Infinity (INFY ) posted a third quarter loss of 55 cents per share, vs. a 4 cents loss despite an 86% rise in revenue. The company says that its pipeline production has not met management's expectations.
Toys 'R' Us (TOY ) reported a larger-than-expected third quarter loss of 18 cents per share, compared with a net loss of 13 cents per share in the same quarter in 2002. The company says it will close 146 freestanding Kids "R" Us stores, and more than 30 Imaginarium stores, along with three distribution centers.
World Wrestling Entertainment (WWE ), the name behind wrestling programs such as "Smackdown" and "Wrestlemania" reported higher third-quarter profits thanks to bigger pay-per-view income and television rights fees.
Lowe's (LOW ) posted third quarter earnings of 56 cents, vs. 43 cents per share on a 12% rise in same store sales, and a 24% rise in total sales. The company sees fourth quarter earnings as high as 49 cents, and fiscal 2004 earnings as high as $2.33.
Treasuries ended higher Monday, though off their highs, as a flight-to-safety bid from terror threats of a wider and more specific nature over the weekend helped propel prices higher, despite further evidence of improving economic fundamentals.
Besides the better-than-expected inventories report, the market digested a record-high reading of the New York Fed's Empire State Manufacturing Index of 41.0 in November, compared to an upwardly-revised 34.1 in October. The average workweek rose to 12.4 from 11.7, while the number of employees slipped to 10.3 from 11.5. New orders rose to 41.4 from 34.3 while shipments jumped to 37.6 from 26.8. Prices paid rose to 9.4 from 7.7, while prices received improved to -4.3 from -10.6.
European stock markets sold off Monday, on worries of global terrorist threats, and a lower U.S. open. London's Financial Times-Stock Exchange 100 index had lost 58.10 points, or 1.32%, to 4,338.90. U.K. business leaders have urged the Bank of England not cut interest rates again too soon, because that might abort the economic recovery, reports S&P's MarketScope.
In Paris, the CAC 40 has shed 89.30 points, or 2.59%, to 3,359.30. Germany's DAX index has slipped 122.86 points, or 3.24%, to 3,674.50.
Asian stock markets finished sharply lower Monday amid terrorism threats in Japan from Al Qaeda. Japan's Nikkei 225 index shed 380.23 points, or 3.74%, to finish below the 10,000-mark at 9,786.83. Market participants are disappointed in the lack of rebound, reports MMS, adding that "the Japanese stock market was reportedly dragged down by Al Qaeda's threat to attack Tokyo if Japan dispatches its troops to Iraq."
In Hong Kong, the Hang Seng index lost 206.51 points, or 1.69%, to finish at 11,997.02.