Stocks Fall as Investors Can't Shake Economic Woes

By: AP
By: AP

NEW YORK – Investors sent Washington a message this week: They won't commit to stocks until the government commits to a plan.

Stocks ended lower Friday, pushing the Dow Jones industrial average to its lowest close since last November and leaving it with a weekly decline of 5.2 percent.

The gears are moving in Washington. On Friday, the White House said President Obama will outline steps to stem home foreclosures next Wednesday, and the House passed a $787 billion economic stimulus bill.

Wall Street is focused, though, on lingering uncertainties. The stimulus package — too big for some, too small for others — is far from proving itself effective in reviving the economy. Investors also hesitated to get too excited about the upcoming announcement on preventing home foreclosures, after their hopes got dashed earlier in the week.

The bulk of the market's decline this week came Tuesday, when U.S. Treasury Secretary Timothy Geithner said he would assess banks' financial health and remove their toxic assets with the help of the private sector — but provided few details about how the process would work.

"Until we get this clarity, I think it's just stop and go. I don't think we collapse from here, but I don't think we go much higher," said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc.

It's possible some clues will emerge from the meeting of Group of Seven finance ministers. Officials from leading industrial nations are discussing new financial markets rules, concerns about protectionist measures in stimulus plans, and the effect of the financial crisis on poorer countries. But few analysts anticipate major breakthroughs in the group's report Saturday.

A spate of gut-wrenching economic and corporate earnings reports over the past few weeks have also left the market deeply unsettled. On Friday, the University of Michigan delivered the latest dose of gloomy news, reporting that consumer sentiment dropped sharply in February. The economy should rebound eventually, but economists are unsure how much further it will slide in the meantime — and fund managers don't know yet which companies will come out on top.

With stock prices so low, "you're certainly rewarded for risk-taking. Unfortunately, it's not a great environment to take a lot of risk," said Jack A. Ablin, chief investment officer at Harris Private Bank. "It's a game of chicken, and most of us are chickens."

The Dow fell 82.35, or 1.04 percent, to 7,850.41. It was the lowest close since Nov. 20, when the blue-chip index settled at a five-and-a-half month low of 7,552.29.

U.S. markets are closed Monday for Presidents Day.

Broader stock indicators also fell. The Standard & Poor's 500 index lost 8.35, or 1.00 percent, to 826.84, and the Nasdaq composite index decreased 7.35, or 0.48 percent, to 1,534.36. The S&P 500 ended the week down 4.8 percent, and the Nasdaq finished the week down 3.6 percent.

The Russell 2000 index of smaller companies fell 2.06, or 0.46 percent, to 448.36.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 4.5 billion shares, down from 5.65 billion on Thursday.

Bond prices declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.90 percent from 2.79 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.28 percent.

The dollar fell against most other major currencies. Gold prices also declined.

Light, sweet crude rebounded $3.53 to settle at $37.51 a barrel on the New York Mercantile Exchange, after falling to its lowest price this year on Thursday.

Not all companies' quarterly results have disappointed Wall Street.

PepsiCo said its fourth-quarter profit fell, but the soft drink maker's adjusted results met analysts' expectations. Pepsi shares rose 57 cents to $52.57.

Abercrombie & Fitch Co. said its fourth-quarter profit slid 68 percent due to hefty asset impairment and tax costs and dropping sales. But the results, after stripping out one-time items, beat estimates. The teen retailer's shares rose $2.08, or 10 percent, to $22.78.

But the outlook for corporate America remains grim, and layoffs keep piling up.

Toyota Motor Corp., slammed by poor U.S. sales, said it is offering buyouts to about 18,000 workers. The Japanese automaker is also slashing executives' compensation up to 30 percent and cutting production. Toyota's U.S. shares fell $2.01, or 3 percent, to $65.45.

Overseas, Japan's Nikkei stock average rose 0.96 percent. Britain's FTSE 100 fell 0.30 percent, Germany's DAX index rose 0.13 percent, and France's CAC-40 rose 1.13 percent.

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The Dow Jones industrial average closed the week down 430.18, or 5.2 percent, at 7,850,41. The Standard & Poor's 500 index fell 41.76, or 4.8 percent, to 826.84. The Nasdaq composite index fell 57.35, or 3.6 percent, closing at 1,534.36.

The Russell 2000 index, which tracks the performance of small company stocks, declined 22.34, or 4.7 percent, to 448.36.

The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended at 8,385.74, down 399.35, or 4.55 percent, for the week. A year ago, the index was at 13,652.73.


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