As terror worries mount, investors sell; Dow down 77
NEW YORK — Worries about war and terrorism upset Wall Street Tuesday, sending stocks lower after the release of a tape purportedly of Osama bin Laden expressing solidarity with Iraq.
Investors also sold stocks after Federal Reserve Chairman Alan Greenspan said Iraq represents the biggest uncertainty for the economy. Analysts said long-term gains for the market are doubtful until there is resolution in the Middle East.
"The big picture is a big trading range until the uncertainties are out of the way," said Matt Brown, head of equity management at Wilmington Trust. "I don't see a catalyst getting the market going up quickly other than the elimination of the threat of war."
The Dow Jones industrial average dropped 77.00, or 1 percent, to close at 7,843.11, after gaining 55 points Monday to snap a four-day losing streak. Earlier in the day, blue-chip stocks rose as much as 65 points.
The broader market also finished lower. The Nasdaq composite index slipped 1.22, or 0.1 percent, to 1,295.46. The Standard & Poor's 500 index dropped 6.77, or 0.8 percent, to 829.20.
The al-Jazeera Arab satellite station broadcast an audiotape yesterday purportedly from bin Laden calling on Iraqis to stand firm in the face of a U.S. attack. The station said the tape seems authentic because it was received through the same means as previous bin Laden recordings.
But if the uncertainty diminishes in the near term, "our more probable expectation" is that businesses will boost spending and help the economy, Greenspan added as part of his semiannual economic report to Congress.
Analysts say investors have been hesitant to make major stock purchases until there is a resolution with Iraq. But they add that the market could see some gains on bargain-hunting after four weeks of losses.
The three main gauges in recent days hit four-month lows, although the Dow and S&P 500 remain about 7 percent above their five- and six-year lows reached on Oct. 9. The Nasdaq is about 16 percent above its six-year low reached on the same day.
"We've been concerned about the market's inability to advance," said Charles H. Blood Jr., senior financial markets analyst at Brown Brothers Harriman & Co. "Now the downtrend is establishing, we believe we have to come close to the October low to get to an oversold bottom" before stocks can recover.
"The background story hasn't changed in terms of geopolitics and economics, so it looks like the stock market will have difficulty for a while," he added.
MetLife dropped $1.38 to $24.62 after the insurer posted fourth-quarter earnings that missed estimates.
Scholastic slid $7.71, or 22.9 percent, to $25.95 after the publisher of Harry Potter books lowered its fiscal 2003 outlook.
Gainers included Aetna, which rose $1.55 to $43.40, after the health insurer reported quarterly profits that beat Wall Street's expectations.