Stocks Finish with Losses

Major indexes shed about 1% on a late burst of selling. Traders were anxious for word if a key al-Qaeda operative had been captured

Stocks finished lower Friday. Investors were waiting to see if Pakistani troops would capture a key al-Qaeda figure, Ayman Al-Zawahri, near the Afghan boarder. In the absence of any conclusive reports on the troops' progress, sellers took over late in the session.

The Dow Jones industrial average finished down 109.18 points, or 1.07%, at 10,186.60. The broader Standard & Poor's 500-stock index ended 12.58 points lower, or 1.13%, to 1,109.74. The Nasdaq composite index shed 21.97 points, or 1.13%, to 1,940.47.

Semiconductor stocks were lower, as the February semiconductor book-to-bill ratio fell to 1.14-to-1 compared with January's 1.19-to-1. Airline stocks were also higher, while steel stocks enjoyed a lift from Nucor's (NUE ) improved earnings guidance.

There were no major economic releases scheduled for Friday.

While the end of the week's trading wasn't stellar, Richard Dickson, of Lowry's Reports in Florida, says that it isn't likely to develop into a trend. "Given the evidence of near panic selling... and the evidence of an extremely oversold market... that accompanied the market's recent lows, chances of the market falling into a renewed bear trend at this point seem remote."

Other analysts note that markets have little to go on in the void between earnings seasons, but that there's room for optimism in April. Larry Wachtel, market analyst at Wachovia Securities, wasn't surprised by the week's see-saw motion in the markets, as there's "a lack of real, dramatic stimulus," he says. The next era of stimulus won't arrive until earnings season begins again in April, but already the signs are good, he says, noting a number of "upside revisions" to first quarter guidance from companies.

In economic news this week, the Federal Reserve decided to hold rates stable. "Investor concerns will likely be tabled until the summer," says senior S&P economists David Wyss and Beth Ann Bovino in their weekly notes. "The strength of employment growth, financial markets, inflation and overall strength of the economy the next few months will determine whether the Fed hikes sooner or delays until after the election."

But fears of terror had more impact on the markets early this week than economics, Wyss adds.

Next week's earnings calendar is light. Companies slated to report quarterly results include Walgreen (WAG ) on Monday, Goldman Sachs (GS ) on Tuesday, and ConAgra Foods (CAG ) on Thursday.

In economic news next week, traders will hear durable goods orders, and new home sales on Wednesday. Thursday's docket is busy with the final fourth quarter GDP numbers, initial jobless claims, and existing home sales. Friday brings a read of Michigan Consumer Confidence, as well as February personal income.

In corporate news Friday, Time Warner (TWX ) is apparently mulling over what to do with its America Online division, and according to the New York Post, one potential buyer on the minds of execs is tech giant Microsoft (MSFT ). Time Warner shares finished higher, and Microsoft shares ended lower.

After Thursday's close, Adobe Systems (ADBE ) posted better-than-expected first quarter earnings (GAAP) of 50 cents per share, vs. 23 cents a year ago, on a 43% revenue rise. The company sees second-quarter earnings as high as 39 cents (GAAP and non-GAAP). The company has raised its fiscal 2004 revenue guidance to an upward range of $1.5 billion, up from $1.4 billion. Prudential upgraded its rating of the stock, and S&P reiterates its buy rating. Shares of Adobe gained 10%.

In steel, Nucor added 7.2% after raising its first quarter earnings guidance to a range of 80 cents to $1.00 per share. The company cites strong pricing across all of its product lines, accompanied by increased demand, and decreased pre-operation, start-up costs have increased its EPS expectations.

Tektronix (TEK ) gained 5.1%, as it posted better-than-expected February-quarter numbers. The maker of monitoring and measuring systems posted third-quarter earnings of 33 cents, vs. 13 cents, from operations on a 30% sales rise. S&P has maintained its hold rating of Tektronix.

Data networking company 3Com (COMS ) reported a third-quarter net loss of 22 cents per share, vs. a 22 cents loss, on a 21% decline in revenues. The company sees its total fourth-quarter revenues flat to slightly higher sequentially. S&P has kept its hold rating. Shares dipped 5.2% lower.

The maker of operating systems for handhelds, Palmsource (PSRC ), posted third-quarter EPS of a nickel, vs. 7 cents, on an 18% total revenue decline. The company expects a fourth-quarter loss between $4 million and $7 million (GAAP). Palmsource shed 17%.

Treasury Market

Treasuries finished lower in price Friday, in a light session. Selling was aided by the weaker dollar -- without foreign exchange intervention -- and news that Pakistani troops were closer to capturing a key al-Qaeda figures, reports economic research firm Informa Global Markets.

Overall, treasury yields were flat this week. "The 10-year [yield was] up slightly from last week's eight-month low of 3.7%, though mixed economic data and global security concerns kept yields down," reports S&P's Weekly Market Analysis.

In currencies, the British pound was at $1.831, while the euro was at $1.227, and the dollar was at 106.85 yen (the yen was almost at a two-month high). Japan's Mainchi Shimbun reported that the Bank of Japan will reduce the scale of its financial exchange intervention.

World Markets

European stock markets finished mixed on Friday. London's Financial Times-Stock Exchange 100 index ended 19.8 points higher, or 0.45%, to 4,417.7. Bank of England monetary policy committee member, Paul Tucker, has said that interest rates will rise to curb excessive spending. Coca-Cola (KO ) is recalling its bottles of Dasani water in Britain, after a test of the water found high levels of bromate. Shares in New York ended mostly unchanged.

In Paris, the CAC 40 finished 23.3 points higher, or 0.65%, to 3,613.28. Shares of Schneider, Arcelor, and Total were higher.

Germany's DAX index ended down 8.28 points, or 0.22%, to 3,819.15. Shares of Siemens and SAP were higher, but Allianz and Bayer were both lower.

In Asia, the equity markets finished lower. The Nikkei 225 index dipped 65.77 points lower, or 0.57%, to 11,418.51. Minutes from the Bank of Japan's policy meeting showed that many board members thought the economy was generally following a stead recovery path.

In Hong Kong, the Hang Seng index slid 25.61 points, or 0.2%, to 12,790.58.

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