Updated from 4:03 p.m. ESTStocks slumped again Tuesday amid reports of violence in Iraq, surrendering much of their gains from Monday's rally. Wall Street continued to weigh the likelihood of a market correction, with the government's much anticipated employment report due out Friday. The Dow closed down 86.66 points, or 0.8%, to 10,591.48; the S&P 500 lost 6.87 points, or 0.6%, to finish at 1149.10; and the Nasdaq was down 18.14 points, or 0.9%, to end at 2039.66. Volume on the New York Stock Exchange approached 1.5 billion shares, with decliners beating out advancers by 5 to 4. Some 1.9 billion shares changed hands on the Nasdaq, where decliners topped advancers by nearly 2 to 1. Jay Suskind, head of institutional equity trading at Ryan Beck & Co., attributed Tuesday's selloff to profit-taking in the wake of Monday's run-up, combined with the prospect of higher interest rates down the road. "I don't necessarily agree with that," Suskind said. "I think the market, in the long run, will benefit from rates moving higher, meaning the economy is growing faster and jobs are appearing and so forth, but I think today is just a trading type of pause with the excuse of higher rates." John Hughes, an equity strategist at Shields & Co., said he has been waiting for a correction in the markets for weeks. "I think you've probably just about run your course as far as this rally should go, and we're looking for the markets to really pull back from these levels," he said. Hughes predicted that both the Dow and the S&P will shed 5% to 7% and the Nasdaq 10% before the bulls run again. He added that Friday's monthly employment report from the government will dictate how things proceed in the short term. "This employment number on Friday could really be key in letting you know how it's going to shake out," he said.
Economists on Wall Street expect nonfarm payrolls will increase by 125,000 jobs, while the unemployment rate will stay at 5.6%. The results of the report are scheduled for release at 8:30 a.m. EST on Friday. Tuesday's session comes amid a backdrop of growing violence in the Middle East. More than 80 people are reported dead following a series of explosions in the Iraqi cities of Karbala and Baghdad on Tuesday. The simultaneous attacks occurred as Shiite pilgrims gathered for Ashoura, the holiest day in the Shiite calendar. Overseas markets finished mostly higher, with London's FTSE up 0.7% at 4540 and Germany's Xetra DAX up over 1% to 4100. In Asia, the Nikkei closed 0.8% higher at 11,362, while Hong Kong's Hang Seng fell 1.4% to 13,731. The dollar surged against major currencies. One euro was worth $1.2222, down from $1.2457 Monday, while the dollar was buying 110.11 yen. Among other assets, the 10-year Treasury note was down 18/32 in price to yield 4.04%, while gold, heating oil and crude were all slightly lower. In corporate news, BJ's Wholesale ( BJ) reported better-than-expected fourth-quarter earnings. The membership-warehouse chain reported net income of $49.2 million, or 70 cents a share, for the 13-week period ended Jan. 31, compared with $48.5 million, or 70 cents a share, a year earlier. Analysts forecast earnings of 65 cents a share, according to Thomson One Analytics. Shares of BJ's closed up 70 cents to $25.14. Cablevision ( CVC) posted a deeper-than-expected loss. It reported a fourth-quarter loss of $197.4 million, or 69 cents a share, compared with net profit of $529.7 million, or $1.66 a share, in the year-earlier period. The year-ago period included a $663.4 million gain from the sale of the Bravo cable channel to NBC. Analysts were predicting a loss of only 45 cents a share.
Cablevision shares finished down 89 cents at $25.35. Marvel ( MVL) raised guidance and set a 3-for-2 stock split. For 2004, the comic book publisher said its earnings per share will be in the range of $1.23 to $1.37 on an anticipated "full" tax rate of 41%. Its prior view of $1.31 to $1.48 assumed a tax rate of about 37%. Shares of Marvel ended the day down $2.84 to $32.50. Shareholders gathered in Philadelphia ahead of Disney's ( DIS) much-anticipated annual meeting scheduled for Wednesday. Stanley Gold and his fellow former director Roy Disney continued the campaign to get shareholders to withhold their votes for Michael Eisner and other directors at Wednesday's meeting. The company's shares closed down 11 cents to $26.76. On Wednesday, expect a reading on economic activity in the service sector from the Institute of Supply Management at 10 a.m. EST. The ISM Services Index is expected to drop from January's reading of 65.7 to 63.4. Then, the Fed will release its beige book, a general report on economic conditions around the nation at 2 p.m. EST. Earnings reports are expected from Costco ( COST), which is expected to report second-quarter earnings of 47 cents a share, compared with last year's 43 cents; Saks Fifth Avenue ( SKS), forecast to have first-quarter earnings of 62 cents a share vs. last year's 53 cents; and Toys R Us ( TOY ), which is expected to report fourth-quarter earnings of $1.05 a share compared with last year's $1.27.