Stocks Finish with Small Losses
Stocks finished with modest losses Thursday as investors awaited more updates on the U.S.-led war against Iraq. Progress toward Baghdad has boosted hopes, but disappointing economic data remain an ongoing concern for Wall Street.
On Thursday, the Dow Jones industrial average fell 44.68 points, or 0.54%, to 8,240.38. The broader Standard & Poor's 500-stock index shed 4.45 points, or 0.51%, to 876.45. Meanwhile, the tech-heavy Nasdaq composite index fell 0.14 point, or 0.01%, to 1,396.58.
In the latest war news, U.S.-led troops captured the Baghdad airport with tanks and armored units against almost no opposition from Iraqi forces. Meanwhile, large sections of the Iraqi capital remain without electric power. Earlier Thursday, President Bush said at a speech to U.S. Marines in North Carolina: "the vise is closing on Saddam's regime." The markets are hoping that a battle in Iraq's capital signals an end to the war.
Economic data continued to disappoint. An update on initial jobless claims showed a rise of 38,000 to 445,000 for the week ended March 29, much higher than expected. These data add to expectations for a sluggish payroll report Friday. The report, which is expected to show a rise in the unemployment rate to 5.9%, is due at 8:30 a.m. ET.
"Over the last week there has been one bad economic data point after another, and the market has not taken much notice," says Trip Jones, senior vice-president of Fulcrum Global Partners. "Payroll employment is an important number, is the least likely to be ignored and will have an impact after the war." Jones figures that stocks could rally once more when the war concludes, but the gains would be short-lived because investors will then refocus on earnings and economics.
Besides war and economy headlines, earnings will be on the docket Friday. An update from Dow industrials member Alcoa (AA ) will mark the unofficial start of the earnings season. Analysts are expecting the aluminum company to post fiscal first quarter earnings per share of 21 cents, down from last year's 22 cents.
Increasingly, the markets are taking into account the impact of the SARS viral infection. Economists are already calculating economic damage to Asia. Health experts have urged travelers to avoid Hong Kong and China's Guangdong province.
Among the latest reports of corporate misdeeds, five more HealthSouth employees were set to plead guilty to criminal charges of accounting fraud. Former CEO Richard Scrushy and others at the chain of rehab hospitals are accused of overstating earnings by $1.4 billion since 1999, and of inflating the value of assets by $800 million.
Borders Group (BGP ), the No. 2 U.S. bookseller, said it would post a loss in the first quarter as the war in Iraq hurt sales. Borders says it cannot offer earnings guidance due to the uncertain environment.
On a similar note, Southwest Airlines (LUV ) said March traffic was hurt by the Iraq war. It also declined to offer future guidance because of the war impact on travel.
Weak jobless claims data helped propel Treasuries higher out of the gate early Thursday, but gains were tempered by a stock rally and continued positive news on the war front, according to economic research outfit MMS International.
In another troubling economic report, the Institute of Supply Management's non-manufacturing index fell below 50 to 47.9 in March. In February, the widely watched service-sector gauge stood at 53.9. A number below 50 signifies contraction for the sector.
European markets finished mixed as a World Bank projection that war in Iraq will cut first-half global growth by a half percentage point. In London, the Financial Times-Stock Exchange 100 index finished up 17.70 points, or 0.47%, to 3,771.10. In Germany, the DAX fell 19.54 points, or 0.75%, to 2,569.81. In France, the CAC 40 Index gained 44.81 points, or 1.63% to 2,788.69.
Asia markets finished down as worries about SARS continued. Asia's economic outlook is dimming due to the outbreak of SARS. The tourism, retail and consumer-services sectors are hurting most. Morgan Stanley cut its 2003 growth forecast for Asia, excluding Japan, to 4.5% from 5.1%, if the impact of SARS lasts one quarter. In Tokyo, the Nikkei 225 index lost 52.10 points, or 0.65%, to close at 8,017.75. In Hong Kong, the benchmark Hang Seng index fell 58.03 points, or 0.67%, to close at 8,648.16.