War worries fuels week of losses on Wall Street
Published: Saturday, January 25, 2003 at 6:01 a.m.
Last Modified: Saturday, January 25, 2003 at 1:42 a.m.
NEW YORK - The prospect of war with Iraq hit Wall Street hard this week, as anxiety about the future wiped out the big January rally and put the market below where it started the year. The Dow Jones industrials suffered three triple-digit declines - and four of the past five sessions - on fears a war would further undermine the already questionable business recovery.
``The situation in the Mideast has got people shackled,'' said Michael Murphy, head trader at Wachovia Securities, noting that bad earnings or at least lukewarm results have given investors even more reason to be conservative.
The Dow and the Standard & Poor's 500, which measures performance of the broader market, each ended the week at levels not seen since October.
Analysts say there simply is no compelling reason to buy stocks, and investors, scarred by three years of declines, aren't going to do so while the uncertainty of war looms.
``The overhang of the possibility of war remains the key influence,'' said Alan Ackerman, executive vice president of Fahnestock & Co.
Friday's sell-off was in large part due to investors preferring not to take any chances going into the weekend ahead of a report due Monday by U.N. weapons inspectors in Iraq. So far, the inspectors have uncovered few of the thousands of weapons that the Bush administration maintains that Iraq's President Saddam Hussein has concealed.
``This is a market of abdication,'' said Larry Wachtel, market analyst at Prudential Securities. ``Usually there is a smoking gun, some specific corporate news that sparks a sell-off. This time it's simply a malaise of war.''
There was also a lack of positive economic or earnings news to inspire investors to bid stocks higher.
``There are a host of problems out there but the big problem is the geopolitical problem,'' said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. ``With (Friday) being a freebie on economic news and scant list of earnings reports coming out, the market chose to solely focus on the (potential) war.''
The market also was awaiting President Bush's State of the Union address on Tuesday, when he is expected to talk about Iraq and the seesawing economy.
A war with Iraq or even the possibility of it has negative implications for the economy and that's why the market is in such turmoil.
One concern is that higher oil prices that are expected to result from a war in the Middle East will quash an economic recovery and negate the potential benefits of Bush's proposed $674 billion tax cut package - assuming that plan is approved by Congress.
Another concern is that consumers will adopt a bunker mentality and will clamp down on their spending, which accounts for two-thirds of the economy.
``The story continues to be the war watch,'' Murphy said. ``People are staying out of the market. ... the big mutual fund complexes have been very, very quiet (in trading). They are still waiting for the economy to turn around. We haven't seen that yet, and we need to see that.''
For the week, the Dow Jones industrial average fell 455.73, or 5.3 percent. It closed Friday at 8,131.01.
The Nasdaq had a weekly loss of 34.05, or 2.5 percent, ending at 1,342.14 Friday. The Standard & Poor's 500 index had a weekly decline of 40.38, or 4.5 percent, finishing at 861.40 Friday.
For the week, the Russell 2000 index, the barometer of smaller company stocks, fell 13.04, or 3.4 percent. It ended Friday at 375.06.
The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 8,175.75, down 354.57 from last week. A year ago, the index was at 10,566.01.
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