B: Interest Rate Fears Prompt Stock Selloff ( AP Online )
B: Interest Rate Fears Prompt Stock Selloff ( AP Online )
NEW YORK, Apr 13, 2004 (AP Online via COMTEX) -- Investors worried that booming
retail sales might lead to a sooner-than-expected interest rate hike sold off
stocks Tuesday, sending the Dow Jones industrial average down more than 140
points.
The Commerce Department reported a 1.8 percent increase in retail sales for
March, the biggest jump in a year and far better than the 0.6 percent economists
expected. Consumer spending increased across the board, fueled by tax returns,
an improving employment picture and low interest rates.
But the sharp jump raised the specter of inflation, and concerns that the
Federal Reserve would raise interest rates to keep the economy from growing too
fast. And a hike before year's end could put President Bush's re-election into
question, according to Hugh Johnson, chief investment officer at First Albany
Corp.
"That worries investors that we're going to see a Democratic administration,
which might roll back the 15 percent tax rate on capital gains and dividends,"
Johnson said. "It's a whole string of dominoes. If this weren't an election
year, you'd see earnings and economics outweigh the interest rate concerns."
While the retail data helped the markets open higher, the major indexes quickly
slipped into negative territory. In late afternoon trading, the Dow Jones
industrial average was off 144.28, or 1.4 percent, at 10,371.28.
Broader stock indicators also dropped. The Standard & Poor's 500 index was down
17.06, or 1.5 percent, at 1,128.14, and the Nasdaq composite index fell 39.00,
or 1.9 percent, to 2,026.48.
The selling was broad, with every major sector losing ground, since rising
interest rates could make borrowing difficult for most companies. But Stuart
Freeman, chief equity strategist for A.G. Edwards & Sons, said there's still a
chance the Fed may hold off on a rate hike until the end of the year.
"I think the Fed will want to see more than one really strong employment number
and maybe a few more numbers like this retail figure before they move," Freeman
said, alluding to the 308,000 jobs created in March. "It increases the
likelihood that they could do something before the end of the year, maybe a
modest move this summer, but they may also wait until after the election."
In the meantime, with earnings season under way, healthcare products maker
Johnson & Johnson and investment firm Merrill Lynch & Co., two closely watched
stocks, both surpassed Wall Street estimates in announcements before the start
of trading. But these were overshadowed by the interest rate worries, and may
not have been impressive enough to move the market anyway.
"Investors want to be awed. It's come to that, quite frankly," said John Lynch,
chief market analyst at Evergreen Investments. "We have the market expecting 17
percent, so it better be 20 percent for the market to be really impressed."
Strong sales and favorable exchange rates spurred a 20 percent hike in profits
at Johnson & Johnson, which beat estimates by 3 cents per share and gained 40
cents to $51.60. Merrill Lynch, meanwhile, slumped $1.38 to $58.35 after posting
record first-quarter earnings of $1.22 per share, beating analysts expectations
by 15 cents per share.
Falling mortgage bank income hurt BB&T Corp.'s earnings, which missed estimates
by 3 cents per share. BB&T lost 38 cents to $34.52.
Media company Dow Jones & Co. fell 95 cents to $48.00 after reporting a 73
percent drop in first-quarter earnings due to a one-time gain a year ago. The
publisher of The Wall Street Journal beat analysts' expectations by 2 cents per
share, however.
Intel Corp. was up 9 cents at $27.69 in advance of its earnings report, due
after the close of trading Tuesday.
Declining issues outnumbered advancers by nearly 6 to 1 on the New York Stock
Exchange, were volume came to 1.08 billion shares, compared with 831.88 million
at the same point Monday.
The Russell 2000 index of smaller companies fell 15.21, or 2.5 percent, to
584.44.
Overseas, Japan's Nikkei stock average gained 0.4 percent. Britain's FTSE 100
was up 0.6 percent for the session, France's CAC-40 closed 0.9 percent higher,
and Germany's DAX index surged 1.4 percent in late trading.
---
On the Net:
New York Stock Exchange: nyse.com
Nasdaq Stock Market: nasdaq.com
By MICHAEL J. MARTINEZ
AP Business Writer
Copyright 2004 Associated Press, All rights reserved
-0-
APO Priority=u
APO Category=1320
(PROFILE
(CO:Johnson & Johnson; TS:JNJ; IG:DRG;)
(CO:Merrill Lynch & Co; TS:MTDB; IG:SCR;)
(CO:BB&T Corp; TS:BBT; IG:BNK;)
(CO:Intel Corp; TS:INTC; IG:SEM;)
(COUNTRY:France; ISOCOUNTRY3:FRA; UNTOP:150; UN2ND:155; APGROUP:Europe;)
(COUNTRY:Germany; ISOCOUNTRY3:DEU; UNTOP:150; UN2ND:155; APGROUP:Europe;)
(COUNTRY:Japan; ISOCOUNTRY3:JPN; UNTOP:142; UN2ND:030; APGROUP:Asia;)
(COUNTRY:United Kingdom; ISOCOUNTRY3:GBR; UNTOP:150; UN2ND:154; APGROUP:Europe;)
(COUNTRY:United States; ISOCOUNTRY3:USA; UNTOP:021; APGROUP:NorthAmerica;)
)
KEYWORD: NEW YORK
SUBJECT CODE: 1320
*** end of story *** |
