Stocks Head South

The March slump deepens, as the major indices flirt with their 2005 lows.
By Robert Holmes ,

Updated from 4:06 p.m. EST

Stocks suffered another battering Tuesday as the market's March swoon took the major indices close to their lows for the year.

The

Dow Jones Industrial Average

shed 79.95 points, or 0.76%, to 10,405.70, and the

S&P 500

slid 8.92 points, or 0.76%, to 1165.36, while the

Nasdaq

dipped 18.64 points, or 0.94%, to 1973.88. At today's levels, the Dow and S&P 500 are now near their 2005 closing lows of 10,368.61 and 1163.75, respectively, which were touched on Jan. 24. The Nasdaq closed at a level last seen in late October 2004.

Trading volume on the

New York Stock Exchange

was 2.18 billion shares, with decliners beating advancers by a 2-to-1 ratio. Volume on the Nasdaq was 1.78 billion shares, with decliners outpacing advancers by about a 3-to-1 rate.

In other markets, the 10-year Treasury note was up 14/32 in price to yield 4.58%. The dollar fell against the euro while the yen fell for the ninth straight day against the dollar, its longest losing streak since 2001.

Oil held around $54 a barrel ahead of tomorrow's inventory report from the Energy Department, which is expected to show a 2.3 million-barrel rise in crude reserves and a 1.5 million-gallon decline in gasoline reserves, according to

Reuters

. The May crude contract finished up 18 cents to $54.23 a barrel, after posting a big decline for the third time in four sessions Monday.

"While stocks appear to be oversold right now after dropping the past several weeks, I think equities lack a catalyst that will help stabilize the market and bring buyers back in," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "In terms of the market today, it's being led lower by basic materials and industrials, due to investors in those groups taking profits and a growing fear that the

Fed

may have to raise rates more aggressively as we head through the year."

Strong sectors Tuesday included telecom and financial. Weaker sectors included retail, semiconductors, materials and industrials.

On the economic front, the Conference Board released its March consumer confidence index, which fell from the previous month to 102.4. The consensus had estimated a slight dip to 103.0 from February's reading of 104.4.

"This market remains very cautious and very nervous," said Peter Cardillo, chief market analyst with SW Bach & Co. "Again, we have the payroll data coming out this Friday. Obviously, this market will continue to scrutinize any numbers that show inflationary pressures continuing to build. Until the bond market terminates its discounting process, at best we're going to get a very nervous market. We're oversold, but the present conditions may not warrant any major reversal anytime soon."

The employment -- or nonfarm payrolls -- report caps a crowded week of economic releases. Economists expect a gain of 220,000 jobs, after a larger-than-expected increase in January.

Overseas markets finished mostly lower, under pressure after Japan reported a slight rise in its jobless rate in February. In Europe, London's FTSE 100 dropped 0.1% to 4919, while Germany's Xetra DAX added 0.2% to 4351. In Asia, Japan's Nikkei fell 1.6% overnight to 11,600, while Hong Kong's Hang Seng dropped 1.4% to 13,412.

Asia also was contending with another natural disaster, this time a strong earthquake that killed up to 1,000 people on an island off western Indonesia. The quake, which hit 8.7 on the Richter scale, initially sparked fears of another tsunami, but no such waves appear to have materialized.

MCI

(MCIP)

has accepted an improved offer from

Verizon

(VZ) - Get Report

of $7.6 billion, rejecting a higher bid from

Qwest

(Q)

. The new bid boosts Verizon's stock-and-cash offer to $23.50 a share from the previous $20.75. Verizon shares added 14 cents, or 0.4%, to $34.86, while Qwest shares gained 4 cents, or 1.1%, to $3.79.

In corporate news, the 37-year reign of

American International Group

(AIG) - Get Report

mastermind Maurice Greenberg will end this week with his retirement as chairman. Greenberg already had been stripped of his CEO title amid a widening investigation of possible earnings manipulation at the nation's biggest insurer. AIG rose $1.18, or 2.1%, to $58.20.

Hewlett-Packard

(HPQ) - Get Report

has picked

NCR

(NCR) - Get Report

Chief Executive Mark Hurd to succeed Carly Fiorina as CEO of the company. Hurd replaces Fiorina, who left H-P in February due to a disagreement with the board over the direction of the company. Shares of H-P jumped up $1.99, or 10%, to close at $21.78. Meanwhile, NCR fell $6.50, or 17.1%, to $31.40.

HCA

(HCA) - Get Report

shares rose more than 6% Tuesday after it raised first-quarter earnings guidance to a range of 88 cents to 93 cents a share. Analysts had been forecasting earnings of 76 cents a share. The company cited higher patient volume and improving bad-debt trends. HCA was upgraded by brokerages Lehman Brothers and Fulcrum Global Partners to overweight and buy, respectively. Shares added $3.08 to $51.95.

Saks

(SKS)

said late Monday that the

Securities and Exchange Commission

has now launched a formal investigation of the company's accounting. Saks also said an internal investigation that was originally expected to be completed by the end of March will now be ready in April. The investigation relates to alleged improper collections of vendor markdown allowances in one of Saks Fifth Avenue's six merchandising divisions, the adequacy of an initial internal investigation in 2002, and accounting and disclosure issues that have since arisen. Saks lost 38 cents, or 2.4%, to $15.37.

The HMO space failed to receive a boost Tuesday after CIBC started several of the sector's biggest names with outperform ratings, citing "conservative" earnings estimates throughout the industry. Among the managed-care companies started at outperform were

WellPoint

(WLP)

,

UnitedHealth Group

(UNH) - Get Report

,

Aetna

(AET)

and

Cigna

(CI) - Get Report

.

Late Monday,

Target

(TGT) - Get Report

said that March same-store sales were running near the high end of the range of its previous estimate. Results are now expected to be near the upper end of its forecasted range of a 6% to 8% increase, due mostly to an earlier Easter holiday this year. Still, shares finished down 23 cents, or 0.5%, to $50.24.

Cablevision

(CVC)

is in talks to bid for

Adelphia

with two private firms, according to a report in

The New York Times

. Shares of Cablevision dropped $1.65, or 5.7%, to $27.35.

Internet giant

Google

(GOOG) - Get Report

has agreed to buy

Urchin Software

, an Internet analytics company, for an undisclosed amount. Google closed down $1.85, or 1%, to $179.57.

In brokerage action, CIBC cut its first-quarter earnings estimate for

McDonald's

(MCD) - Get Report

to 41 cents a share from 45 cents a share, as well as its 2005 EPS estimate to $1.97 from $2.08. The brokerage's move takes into account cost pressures from commodities, discounting in Europe, and lease accounting. CIBC, however, believes that McDonald's U.S. sales will remain strong in 2005 and that restaurants in Europe are set for a recovery. Shares lost 51 cents, or 1.6%, to $31.02.

UBS upgraded

Delphi

(DPH)

to neutral from reduce, citing valuation. UBS noted that the auto parts maker will continue to face challenges, stemming mostly from cash flow and high costs. Delphi added 9 cents, or 2%, to $4.51.

Prudential downgraded

Limited Brands

(LTD)

to underweight from neutral weight, saying the retailer will miss March same-store sales and first-quarter earnings estimates. The brokerage lowered its stock-price target to $21 from $22, fiscal first-quarter earnings EPS to 10 cents from 13 cents and 2005 EPS estimate to $1.53 from $1.56. The stock fell 14 cents, or 0.6%, to finish at $23.63.

On Wednesday, the focus likely will fall on the fourth-quarter final reading of GDP, with a consensus of 4%.

Best Buy

(BBY) - Get Report

, which was scheduled to release quarterly earnings Wednesday, has now delayed reporting for two days.

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