Stocks Slide As Malaise Deepens After CPI
Wednesday February 21, 4:38 pm Eastern Time
By Elizabeth Lazarowitz
NEW YORK (Reuters) - Stocks tumbled on Wednesday as investors' uncertainty about the economy was compounded by an unexpectedly sharp gain in a key U.S. inflation gauge, dragging the Nasdaq market to its lowest close in nearly two years.
The rise in the Consumer Price Index (CPI) raised concerns that deep interest-rate cuts by the U.S. Federal Reserve may not be coming any time soon, dampening hopes of a quick fix for the economic downturn.
``The market seems to be suggesting that maybe the Fed will not cut rates between now and its next scheduled meeting,'' on March 20, said Charlie Crane, strategist at Spears Benzak Salomon & Farrell, which has $4 billion in management.
``I think that's probably a safe wager and to some, that represents a disappointment.''
Technology stocks were in the forefront of the retreat in major market indexes. The tech-heavy Nasdaq Composite Index (.IXIC), tumbled 49.42 points, or 2.13 percent, to finish at 2,268.93, a level not seen on a closing basis since early March 1999.
The blue-chip Dow Jones industrial average (.DJI) dropped 204.3 points, or 1.9 percent, to 10,526.58, posting its lowest close in six weeks. The index was dragged lower by its technology components, as well as by interest-rate-sensitive financial services and retailing companies.
The broad Standard & Poor's 500 Index (.SPX) fell 23.67 points, or 1.85 percent, to end at 1,255.27, its lowest close since mid-October 1999.
Year to date, the Dow is down 2.4 percent, the Nasdaq Composite has fallen 8.2 percent and the S&P 500 is off 4.9 percent.
Investors ``are just moving to the sidelines and saying, 'I need time to think about this,''' said Paul Cherney, market analyst at S&P Marketscope. ``We were okay until PPI and CPI came out and threw a monkey wrench into the whole Fed easing scenario.''
Sun Microsystems (NasdaqNM:SUNW - news), the most active issue in the Nasdaq market, fell $2-5/8, or more than 11 percent, to $19-5/8 after Merrill Lynch downgraded the stock on concerns that an oversupply of used equipment, put up for sale by bankrupt dot-com companies, will cut into Sun's business.
Sun fell to a fresh 52-week low of $19-5/16.
Coca-Cola Co. (NYSE:KO - news), one of the 30 Dow industrials, fell more than 6 percent, or $3.55 to $54.92, after Goldman Sachs on Wednesday cut its rating and removed the company's shares from the U.S. ``Recommended for Purchase'' list.
Earlier Wednesday, Coca-Cola announced the formation of a juice and snack foods venture with Procter & Gamble Co. (NYSE:PG - news). The shares of P&G, one of a handful of Dow winners, rose $1.09 to $76.80.
Early on Wednesday, the U.S. government said the overall Consumer Price Index rose 0.6 percent in January, the biggest gain since last March. The core CPI, excluding volatile food and energy prices, advanced 0.3 percent last month. In December, the overall CPI was up 0.2 percent and the core CPI was up 0.1 percent.
Forecasts called for overall CPI to rise 0.3 percent and the core CPI to gain 0.2 percent in January.
The jump in the CPI followed last week's report of a surge in wholesale prices, measured by the Producer Price Index. Soaring energy prices got the blame for the big jumps in both the PPI and the CPI in January.
Among blue-chip companies, financial services heavyweight American Express Co. (NYSE:AXP - news), slumped $2.01 to $43.97, while Citigroup (NYSE:C - news) dropped $2.90 to $48.30.
Retailers Wal-Mart Stores Inc. (NYSE:WMT - news), off $3.19 to $50.21, and Home Depot (NYSE:HD - news), down $3.14 to $40.95, both dragged on the Dow average.
Some high-tech companies were spared in the broader shakeout, however.
Software titan Microsoft, one of the 30 stocks in the Dow average and one of the most heavily weighted stocks listed on Nasdaq, eked out a gain of 3/8 to $56-1/4. |
