Despite some better-than-expected economic results, stocks were continuing their recent slide Thursday afternoon thanks to ever-increasing war fears and a bleak technical backdrop.
As of 2:46 p.m. EST, the
Dow Jones Industrial Average
was down 1.4% to 7648.53, the
was off 1.3% to 807.62 and the
was down 1.2% to 1263.67.
On the geopolitical front, British Prime Minister Tony Blair reported Iraq may have missiles that violate United Nations restrictions on range. Predictably, Iraqi Deputy Prime Minister Tariq Aziz said the Al Samoud 2 missile program is not in "serious violation" of U.N. resolutions,
Shortly after noon EST, President Bush reiterated his determination to disarm Saddam Hussein, without U.N. support if necessary, and major averages hit their session lows shortly thereafter before stabilizing -- at least temporarily -- at about 1 p.m. EST.
Earlier, Russian Deputy Foreign Minister Yuri Fedotov said chief weapons inspector Hans Blix will report to the U.N. Security Council Friday that Iraq has made little or no progress in being compliant with inspectors. Finally, Secretary of Defense Donald Rumsfeld said U.S. troops would stay in Iraq for "as long as is necessary" in the seemingly inevitable event of war and wouldn't rule out the use of nuclear weapons.
In the separate-but-very-much-related department, NATO canceled a meeting scheduled for Thursday to discuss the contentious issue of whether or not to start plans for defense of Turkey.
Against that backdrop -- and ongoing concerns about terrorist attacks here and in the U.K. -- crude futures hit a 29-month high above $36 per barrel while the dollar had its biggest drop vs. the euro in five months, according to
. Of late, crude futures were up 1.3% to $36.22.
Meanwhile, the price of the benchmark 10-year Treasury note was up 17/32 to 100 3/32, its yield falling to 3.86%. April gold futures were lately up 1.3% to $357.70 per ounce.
War Talk Trumps Data
Geopolitical developments were obviously dictating market action Thursday; otherwise, Treasury prices would likely be lower and the dollar higher, given the morning's economic reports.
The government reported January retail sales fell 0.9%, worse than economists' projected drop of 0.6%. But excluding autos, retail sales rose 1.3%, the biggest jump since September 2000 and vs. expectations for a rise of 0.5%. Additionally, December's retail sales were revised sharply higher. Separately, weekly jobless claims fell 18,000 to 377,000, although the key four-week moving average rose to 389,000 from 386,000.
"The robust sales results in January
excluding autos will likely push up our estimates for the rebound in
first-quarter consumer spending," commented Peter Kretzmer senior economist at Banc of America Securities.
Similarly, David Rosenberg, chief North American economist at Merrill Lynch, said the retail sales report "adds modest upside risk" to his first-quarter GDP estimate. At 1.5%, Merrill Lynch is currently below the consensus forecast of first-quarter growth of 2.5%.
But "financial markets remain preoccupied with war risks for the near-term," and the bond market's reaction to the data was "muted," Kretzmer noted.
Earlier Thursday I wrote about how the "war fears" talk may be coincidental to the recent decline, particularly for the stock market. That may seem contradictory to what's written above, but the point of the earlier piece was that the market often does what it's going to do, regardless of the fundamental backdrop.
In other words, if stock proxies complete certain technical patterns, they might rally regardless of what's happening on the war front. (Conversely, some technicians argue that any presumptive rally timed to the start of war will be destined to fail if certain elements of the current slide aren't completed.)
In that light, the S&P traded as low as 806.29 Thursday afternoon before starting to turn up. As reported earlier, 807 was a level at which John Bollinger of BollingerBands.com thought the index would "make a stand" as it marks the lower end of the S&P's Bollinger Band, a technical measurement that has been turning up lately and has nothing to do with geopolitics.
Setting the discussion of charts aside, there's a more basic issue, as raised by a reader: "Who has any appetite to buy stocks in this environment?"
Of course, buying stocks when others are fearful is a time-honored strategy recommended by legendary investor Warren Buffett. The question remains as to just how scared "everybody else" is: The drop in bullishness to 40.2% from 47.2% in the
index reported Wednesday was a step in the scared direction. Thursday, the CBOE Market Volatility Index traded above 40 for the first time since Jan. 27; the VIX was lately up 3% to 40.28.
But like most sentiment gauges, both indicators remain far from extreme levels reached at past turning points.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.