Updated from 4:06 p.m. EST
Stocks fell for a fourth straight day Tuesday as worries about a potential war with Iraq intensified.
Dow Jones Industrial Average
finished with a loss of 144 points, or 1.68%, to 8443, while the
was down 12 points, or 0.86%, to 1364. The
shed 14 points, or 1.57% to 887.
"The geopolitical issues seem to be casting a pall over the market," said Joe DeMarco, head trader at HSBC Asset Management. "People are sensing that things are coming to a head here and they're afraid to make any decisions."
President Bush on Tuesday said it is clear that Iraqi president Saddam Hussein is not cooperating and warned that "time is running out." DeMarco said investors also remain concerned about the outlook for corporate profits.
Adding to the cautious tone Tuesday was negative economic commentary from Merrill Lynch. The firm said it is cutting its fourth-quarter GDP growth estimate to 0.8% from what was an already-below consensus 1.3% view. While Merrill is leaving its first quarter estimate of 2.75% intact, the firm believes "the risks are to the downside."
"The case is building for the Fed to revert to its de facto easing bias, as early as the Jan. 29th FOMC meeting," Merrill economist David Rosenberg said.
Meanwhile, a survey from Merrill showed that fund managers are not sitting on high levels of cash, suggesting that now may not be a good time to invest.
"Looking back at our survey over the past two years, some of the most profitable moments for equities have been when the market is both cheap and where fund managers have unusually high levels of cash to put to work. That's not the case today," said global strategist David Bowers.
In earnings news,
said fourth-quarter profits fell sharply as a result of a big charge covering its settlement of Wall Street conflict-of-interest charges. The financial services giant earned $2.43 billion, or 47 cents a share, compared with $3.88 billion, or 74 cents a share, last year. Still, the results were slightly ahead of forecasts and the company predicted strong earnings in 2003. Shares fell 1.8% to $36.14.
Fellow Dow component
closed down 0.54% to $125.64 after reporting fourth-quarter net income of $511 million, or $1.29 per share, compared with $381 million, or 96 cents per share, last year. The firm also said it will report first-quarter earnings of $.138 to $1.43, beating expectations of $1.37 a share.
Johnson & Johnson
slipped 1.4% to $53.99 after posting a fourth-quarter profit of $1.4 billion, or 48 cents a share, up from $1.1 billion, or 36 cents a share, last year. The results beat Wall Street's consensus expectation by a penny.
recorded a loss in the latest quarter because of accounting changes, the sale of a discontinued operation and restructuring charges. Before those, the automaker earned $150 million, or 8 cents a share, about a penny a share better than Wall Street estimates. The company also said it expects to earn 20 cents a share in the current quarter, which is better than existing forecasts. Ford was down 0.20% to $10.14.
"Earnings have been fine but the conference calls have been so-so at best," said Art Hogan, chief market analyst at Jefferies & Co.
In the tech sector, shares of
were down 0.88% to $24.75 after UBS Warburg downgraded the stock to neutral from buy. "Dell has traded in broad range of 20-46 time earnings over the past two years, and we believe a more realistic range is 25-35 times based on historical values," UBS said.
rose 6% to $8.97 after UBS upgraded shares to buy from neutral based on improving visibility.
Chip equipment stocks were slightly higher after Salomon Smith Barney analyst Glen Yeung raised his rating on the sector to overweight from marketweight. Yeung said
reduction in capital spending is now reflected in the stocks and he expects orders to be up 5% to 15% in the first quarter.
In addition, Deutsche Bank analyst Timothy Arcuri raised his 2003 forecast for capital expenditures in the semiconductor industry, saying he now expects capex to increase by 7% over 2002 as orders continue to improve. He had previously called for a flat reading.
In M&A activity,
agreed to purchase
First Virginia Banks
for $3.38 billion in stock in a move to boost the acquisitive bank holding company's presence in the South and Mid-Atlantic. BBT slid 7.8% to $34.44 and First Virginia rose 12% to $42.34.
On the economic front, new home starts rose 5% to a seasonally adjusted annual rate of 1.835 million, the highest in more than 16 years. Single-family starts rose 5% to 1.473 million, the most in 24 years. Building permits, a sign of future demand, jumped 8% to 1.88 million, also the most in 16 years.
Volume on the Big Board reached 1.3 billion shares with declines beating advances by 2 to 1. Nasdaq volume hit 1.35 billion shares, with losers beating winners by 2 to 1.
Treasuries were lower in the wake of the stronger-than-expected housing data, with the 10-year Treasury note down 8/32 to yield 4.04%.
Overseas markets were mostly lower with London's FTSE 100 off 1% to 3736 and Germany's Xetra DAX losing 0.79% to 2870. In Asia, Japan's Nikkei was up 1.75% to 8709 while Hong Kong's Hang Seng was down 0.2% to 9568.