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Wall Street Stumbles Again

Robert Holmes

Stocks ended another rocky session to the downside Monday, weighed down by a selloff overseas, disappointing economic data and weakness in the tech space.

The Dow Jones Industrial Average took a turn for the worse late in the session and closed down 63.69 points, or 0.53%, to 12,050.41. The index swung from being down as much as 75 points to up 75 points during the trading day.

Twenty-six of the Dow's 30 components finished in negative territory, led by a 3% decline in Alcoa (AA Quote).

The S&P 500 shed 13.05 points, or 0.94%, to finish at 1374.12, and the Nasdaq Composite tumbled 27.32 points, or 1.15%, to 2,340.68. Both indices had pushed into positive territory before relinquishing gains.

"We had a lot of volatility, and the last half hour we suffered a setback," said Peter Cardillo, chief market economist with Avalon Partners. "The markets remain nervous and continue to feed off of the negative. We are approaching some psychological barriers, such as 12,000 on the Dow, so it'll be interesting to see if we can hold it. We're caught in a trap of a lot of uncertainties."

The major indices finished below last Tuesday's lows, when the Dow sank roughly 546 points in intraday trading. The index is now down 413 points, or 3.3%, for the year. Meanwhile, the S&P 500 has fallen 44 points, or 3.1%, for the year. The Nasdaq has given back 75 points, or 3.1%, for 2007.

Nearly 2.71 billion shares changed hands on the New York Stock Exchange, where decliners outpaced advancers by a 3-to-1 margin. On the Nasdaq, volume reached 2.28 billion shares, as losers trampled winners 3 to 1.

"It looks like no one wants to hold positions overnight, considering what happens in markets overseas," said Paul Nolte, director of investments with Hinsdale Associates. "Nobody is willing to hold, as we don't know what foreign markets will do over the next 24 hours. Right now, investors are looking at the glass half-empty."

A decline in chip stocks weighed on the tech-heavy Nasdaq. The Philadelphia Semiconductor Sector Index, the Semiconductor HOLDRs Index and the Amex Semiconductor Index all were in negative territory, dragged lower by a warning from Advanced Micro Devices (AMD Quote).

Among other market subindexes, the Philadelphia Housing Sector Index fell 2.9%, the Amex Oil Index ended down 1.2%, and the NYSE Financial Sector Index was lower by 1.7%.

The U.S. market is coming off a week where the Dow Jones Industrial Average tumbled 4.2% and the S&P 500 dropped 4.4%, handing both their worst weekly performance since early 2003. The Nasdaq Composite plummeted 5.9% to notch its highest weekly percentage loss since August 2004.

Asian shares, whose volatility last week pressured the U.S., lost ground again as the Japanese yen rallied against the world's major currencies. The Hang Seng in Hong Kong was hardest hit, down 4%. The Shanghai and Shenzhen 300 slumped 1.3%, and Tokyo's Nikkei 225 slid 2.3%.

Equities in western Europe also faltered. London's FTSE 100 lost 0.9%, Frankfurt's Xetra DAX gave up 1%, and the Paris Cac 40 was lower by 0.7%.

Treasury prices were lower for the session. The 10-year note was down 6/32 in price, yielding 4.52%, and the 30-year bond was off 9/32, yielding 4.65%.

Elsewhere, commodities finished lower. Oil eased $1.57 to close at $60.07 a barrel at the New York Mercantile Exchange. Gold was off $4.90 to finish at $639.20 an ounce, its fifth straight loss, and silver was down 21 cents to $12.75 an ounce.

In the session's only economic release, the Institute for Supply Management said the reading of its services index fell to 54.3 in February from 59.0 in January. Economists expected the index to dip to a reading of 57.5 last month.

Ian Shepherdson, chief economist with High Frequency Economics, said that "given the mood of the markets [and] the uncertainty surrounding the economic outlook, the report does not look good. Not everyone is as skeptical as us about its value as a forward-looking indicator."

Among equities, stocks in the subprime sector remained in the news. Shares of New Century Financial (NEW Quote) plummeted 69% after the lender said it is facing a federal criminal probe from the U.S. Attorney's Office for the Central District of California. New Century dropped $10.09 to close at $4.56.

Elsewhere, HSBC Holdings (HBC Quote) posted a 5% rise in profit for 2006. However, the lender said it was taking a charge of $10.57 billion, due to bad subprime loans. The stock finished lower by 36 cents, or 0.4%, to $85.91.

In the tech space, chipmaker AMD warned that first-quarter revenue likely won't meet its guidance of $1.6 billion to $1.7 billion. Shares slumped by 23 cents, or 1.6%, to $13.95.

Meanwhile, BlackBerry maker Research In Motion (RIMM Quote) said it will restate financials dating back to fiscal 2004, because of past stock option reporting errors. The company expects to reduce previous earnings by $250 million. RIM slid $1.44, or 1.1%, to $134.52.

In M&A activity, AT&T (T Quote) is reportedly interested in acquiring Alltel (AT Quote), according to an article in the Wall Street Journal. AT&T eased 2% to $35.72, and Alltel gave back 2.2% to close at $58.60.

Hand-held device maker Palm (PALM Quote) was moving lower amid rumors that Nokia (NOK Quote) will purchase it. Palm sank 9.8% to $16.50, and Nokia finished lower by 0.6% to $21.02.