《【妖舞魔亂】Stocks pull back as investors worry about economy》

 

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By TIM PARADIS 10.23.08, 2:54 PM ET
http://www.forbes.com/feeds/ap/2008/10/23/ap5598603.html

NEW YORK -
Wall Street retreated again Thursday as fears about the health of the economy scared off bargain hunters who had briefly given the market a lift after two days of selling. The Dow Jones industrials fell about 200 points, while the technology-heavy Nasdaq composite index fell more than 3 percent after online retailer Amazon.com lowered its revenue forecast.

The buying that had come in spurts disappeared as investors fretted that the economy is either in a recession or headed for one despite government relief efforts and gradual improvements in world credit markets. Two days of selling that sliced nearly 750 points off the Dow had drawn out some bargain seekers.

With its gyrations, Wall Street is living up to predictions that trading will remain volatile as investors try to test whether the market has formed a bottom. And several of the market's attempts to rally have been short-circuited by sellers who had been waiting for an advance to cash out.

"I think it's people selling into rallies and not being all that excited to buy into declines," said Manny Weintraub, president of Integre Advisors in New York, referring to the market's difficulty maintaining its gains.

Wall Street's jitters came as investors tried to digest a rush of corporate news. Goldman Sachs Group Inc. is preparing to cut about 10 percent of its work force, according to a person briefed on the plan who requested anonymity because the company hadn't publicly disclosed details of the plan.

Meanwhile, Amazon.com Inc. lowered its revenue guidance for the year amid a weakening economy. Drugmaker Eli Lilly and Co. said it booked a loss for the third quarter on a charge of almost $1.5 billion for an expected settlement of an investigation into the marketing of its top-selling drug, Zyprexa. Dow Chemical Co. said its quarterly profit rose 6 percent, helped by price hikes that offset a nearly 50 percent increase in raw materials and energy costs.

A snapshot of the labor market signaled that it continues to weaken. The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. That was slightly above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession. A year ago, claims stood at 333,000, the department said. Analysts caution, however, that the weekly readings can be volatile.

Investors viewed the data as more evidence that the financial crisis is battering the economy and forcing companies to cut back. Market anxiety was already high as investors sift through a batch of corporate forecasts that has stirred intense unease about the health of the global economy.

Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York, cautioned that the market will need to rein in its sharp swings before some investors will feel confident enough to return.

"I don't think anyone can buy and sell stocks right now with conviction," he said.

In midafternoon trading, the Dow fell 202.54, or 2.38 percent, to 8,316.67, after earlier rising more than 277. On Wednesday, the Dow lost 514 points as investors worried that the global economy is poised to weaken. That was on top of a 231-point loss Tuesday.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 28.85, or 3.22 percent, to 867.93, and the Nasdaq composite index fell 64.59, or 4.00 percent, to 1,551.16.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 1.07 billion shares.

Credit markets continued to show signs of slow improvement, although figures released Thursday suggested a return to more normal market conditions will take time. The rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - was unchanged at 3.54 percent. The rate fell to that level on Wednesday and is the lowest since Sept. 24.

Demand for short-term Treasury bills, regarded as the safest assets around, rose. The three-month bill yielded 0.95 percent, down from 1.01 percent late Wednesday. Still, the levels are a notable improvement from the 0.20 percent seen last week, when investors were willing to trade the slimmest of returns for a safe place to keep their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.54 percent from 3.60 percent late Wednesday.

The dollar was mixed against rival currencies after jumping to multiyear highs Wednesday, while gold prices fell.

Light, sweet crude rose $1.42 to $68.17 on the New York Mercantile Exchange. The contract on Wednesday fell to a new 16-month low as big increases in U.S. crude and gasoline stocks fed beliefs that the economic downturn is eroding demand for energy.

The rise in oil helped some energy companies. Exxon Mobil Corp. rose 81 cents, or 1.3 percent, to $65.38.

Amazon fell $2.99, or 6 percent, to $47 after reporting late Wednesday it saw slower growth rates near the end of the third quarter and that it now expects its revenue for the full year to fall short of Wall Street's expectations.

Weintraub said Amazon's forecast is the latest disappointment from the technology sector after lackluster reports from eBay Inc. and Texas Instruments Inc. since last week. Some investors had hoped the sector would sidestep some of the troubles hitting the financial sector and other parts of the economy.

"As we go through earning season earnings are basically not great," he said.

Beyond tech stocks, Goldman Sachs fell $10.58, or 9.2 percent, to $104.13. Eli Lilly fell 37 cents, or 1.2 percent, to $31.74, while Dow Chemical rose $1.73, or 7.8 percent, to $23.84.

The Russell 2000 index of smaller companies fell 23.45, or 4.7 percent, to 478.52.

 

Overseas, Japan's Nikkei stock average fell 2.46 percent. Britain's FTSE 100 rose 1.16 percent, Germany's DAX index fell 1.12 percent, and France's CAC-40 rose 0.38 percent.

Copyright 2008 Associated Press. All rights reserved.

 

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