Stocks open lower as investors watch earnings

By: AP
By: AP

NEW YORK (AP) -- Wall Street tumbled again Wednesday as investors again shifted their focus away from improving credit markets and fixated on worrisome corporate earnings that are raising fears of a deep and painful recession. The major indexes fell more than 1 percent, including the Dow Jones industrial average, which fell 350 points.

While reduced strains in world credit markets have eased some investors' nervousness about the economy, market anxiety remains high as hundreds of companies this week release third-quarter earnings and in some cases fourth-quarter forecasts that offer a glimpse of the rough conditions that may lay ahead.

On Wednesday, commercial and personal property insurer Travelers Cos. said hurricane-related losses pushed third-quarter profit down 82 percent and forced it to lower its full-year forecast.

In other earnings, Wachovia Corp., which is being bought by Wells Fargo & Co., said it swung to a huge loss in the third quarter while the drug maker Merck & Co. said its quarterly profit fell 28 percent and that it would cut more than 10 percent of its work force.

In midmorning trading, the Dow fell 350.93, or 3.88 percent, to 8,682.73. On Tuesday, the Dow retreated 231 points after forecasts from DuPont Co., Sun Microsystems Inc. and Texas Instruments Inc. raised fears that companies' outlooks for the fourth quarter and beyond could signal a severe economic downturn.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 36.59, or 3.83 percent, to 918.46, and the Nasdaq composite index fell 37.44, or 2.21 percent, to 1,659.24.

Meanwhile, credit markets showed more signs of improvement after virtually freezing up last week. Bank-to-bank lending rates fell sharply overnight, indicating that credit is becoming easier to obtain. The London Interbank Offered Rate, or Libor, on three-month loans in dollars fell to 3.54 percent from 3.83 percent, dropping for an eighth straight day.

Demand for Treasury bills, regarded as the safest assets around, grew slightly compared to the previous day as economic worries led investors to shun risky assets in favor of government bonds.

The three-month Treasury bill yielded 1.06 percent, down from 1.07 percent late Tuesday. The levels are a notable improvement from the 0.20 percent seen last Wednesday, when investors were willing to take the slimmest of returns in exchange for a safe place to keep their money.

The dollar was sharply higher against other major currencies, while gold prices fell.

In other corporate news, AT&T Inc. said its third-quarter earnings rose 5.5 percent but missed analyst expectations in part because of strong sales of iPhones, which the carrier subsidizes. The stock fell $1.89, or 7.4 percent, to $23.84.

Other companies reporting results were mixed. Travelers rose 59 cents, or 1.6 percent, to $36.92, while Wachovia fell 14 cents, or 2.4 percent, to $5.95. Merck fell 99 cents, or 3.3 percent, to $28.98.

Light, sweet crude fell $4.38 to $67.80 a barrel on the New York Mercantile Exchange. On Tuesday, oil fell as a stronger dollar dented demand for commodities and overshadowed worries about a planned OPEC output cut.

Declining issues outnumbered advancers by about 8 to 1 on the New York Stock Exchange, where volume came to 141.8 million shares.

The Russell 2000 index of smaller companies fell 11.58, or 2.2 percent, to 519.07.

Financial markets overseas fell sharply. Japan's Nikkei stock average fell 6.79 percent. Britain's FTSE 100 fell 3.43 percent, Germany's DAX index fell 3.52 percent, and France's CAC-40 lost 4.26 percent.


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