U.S. Stocks Finish Worst Week in Four Years as Global Investors Avoid Risk

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U.S. Stocks Drop Again as Confidence Falls; Home Depot Retreats

 

By Eric Martin

 

March 2 (Bloomberg) -- U.S. stocks dropped to a three-month low,

completing their worst week since January 2003, after a decline in

consumer confidence magnified the risk profit growth will be wiped out

by a recession.

 

Home Depot Inc., the biggest home-improvement retailer, slumped for a

12th day as data this week showed new-home sales declined the most in

a decade. Alcoa Inc., the largest aluminum maker, and Exxon Mobil

Corp., the biggest energy company, led the Dow Jones Industrial

Average lower on speculation a weakening economy will reduce demand

for metals and oil.

 

The Standard & Poor's 500 Index retreated 16.01, or 1.1 percent, to

1387.17. It dropped for the third time in the four days since a plunge

in Chinese shares helped spark a worldwide rout. Slowing earnings

growth, a rise in mortgage delinquencies and signs that U.S.

manufacturing is contracting have sent the index down 5 percent since

it reached a six-year high on Feb. 20.

 

``We've been long overdue for a correction,'' said Eric Teal, who

oversees $6.5 billion as chief investment officer at First Citizens

BancShares Inc. in Raleigh, North Carolina. ``The fact that it was a

little more panic-oriented should not surprise too many people.''

 

The Dow average decreased 120.24, or 1 percent, to 12,114.10, the

lowest since Nov. 10. The Nasdaq Composite Index fell 36.21, or 1.5

percent, to 2368.

 

Global Retreat

 

Today's retreat followed a fourth straight drop in Europe and a slide

in Asia that completed that region's worst weekly performance since

July. The Dow Jones Stoxx 600 Index fell 0.3 percent, while the Morgan

Stanley Capital International Asia- Pacific Index lost 0.8 percent.

 

An indicator that measures the rate of expected stock-market swings

rose. The Chicago Board Options Exchange SPX Volatility Index, known

as the VIX, surged 18 percent and closed above its level on Feb. 27,

when stocks had their worst rout in four years.

 

For the week, the S & P 500 fell 4.4 percent, the Dow lost 4.2 percent,

while the Nasdaq dropped 5.9 percent.

 

All three U.S. benchmarks erased their year-to-date gains. Along with

the slump in home sales, reports this week showed orders for durable

goods fell the most in three years, while a barometer of business

activity dropped to the lowest since October 2002.

 

Dresdner Kleinwort, the top-ranked strategy team in the world, said

the global equity selloff isn't over and recommended investors reduce

stocks and buy government bonds.

 

``Stock prices cannot go up indefinitely,'' said Matthew Kaufler, who

helps manage $2.6 billion at Clover Capital Management in Rochester,

New York. ``You need to wring a little of the excess out from time to

time. It wouldn't surprise me at all that sometime here in 2007 we

have a pullback of 10 percent to 20 percent.''

 

Confidence Falters

 

Consumer confidence declined as fuel prices rose, a day after the

government reported an increase in jobless claims last week. The

Reuters/University of Michigan's reading for consumer sentiment fell

to 91.3 last month from 96.9 in January. The figure compares with an

initial reading of 93.3 issued Feb. 16.

 

St. Louis Federal Reserve Bank President William Poole today

acknowledged there ``could be'' a recession, though one isn't likely.

The central bank's consensus estimate is for growth above 2.5 percent

in the coming year.

 

Almost seven stocks fell for every one that rose on the New York Stock

Exchange. Some 1.9 billion shares changed hands on the Big Board, 21

percent more than the three-month daily average.

 

Home Depot dropped 44 cents to $39.01. The stock's 12-day, 6.6 percent

retreat is the longest since the company went public in September

1981. The government this week said new-home sales tumbled in January

by the most in 13 years and fourth-quarter economic growth was less

than previously estimated, dousing speculation that the worst of the

slowdown is over.

 

To contact the reporter on this story: Eric Martin in New York at

emartin21 .

 

Stocks search for bottom, day 2

Dow off about 80 as jitters return; energy and tech hardest hit; bonds

gain.

By Alexandra Twin and Rob Kelley, CNNMoney.com staff writers

March 2 2007: 3:20 PM EST

 

NEW YORK (CNNMoney.com) -- The Dow shed over 80 points in afternoon

trade as energy and technology stocks led the market lower in one of

the toughest weeks in recent Wall Street history.

 

The Dow Jones industrial average (Charts) was down 0.7 percent with an

hour left in the session, recovering from larger declines earlier in

the day, while the broader S & P 500 (Charts) index fell 0.7 percent.

dow_by_numbers.gif

Quick Vote

Is the stock selloff just a blip or the start of a longer downturn?

 

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The Nasdaq (Charts) composite slipped 0.9 percent.

 

As of 3 p.m., the Dow was off 3.8 percent for the week, potentially

its worst week in four years - since losing 4.4 percent at the end of

March 2003.

 

The Nasdaq was down 5.3 percent so far in the week, heading for its

worst week since August 2004.

 

The S & P 500 fell 4.0 percent as the week nears its close, potentially

its worst since January 2003.

Survive the market drop

 

Investors are still reacting to Tuesday's battering that sent the Dow

down 416 points - its biggest one-day point loss since the day the

market reopened after the Sept. 11, 2001, attacks.

 

That decline was sparked by a selloff in the Shanghai market that

quickly spread around the world.

 

After taking a breather Wednesday, stocks fell Thursday, though

declines were modest as investors fought back from a steeper morning

swoon.

 

Declines started small Friday, but the selling picked up as the

session wore on.

 

" This is a market that's trying to find the bottom, " said Art Hogan,

chief market analyst at Jefferies & Co. " Until we get global

stability, we're going to be hard-pressed to find confidence in

domestic markets. Investors will be watching global markets closely

next week. "

 

He said that U.S. declines were based on broad-based concern, rather

than worries about a specific sector of the economy.

 

" You have all three broad market indices down similar percentages, " he

added. " This isn't a sector call; this is a broader market call. "

The Sky is falling ... maybe not

 

In corporate news, Boeing (Charts) Friday took the first step towards

shutting down production of the C-17 military jet, a move that could

cost 7,000 jobs by 2009, due to lack of additional orders for the

aircraft.

 

Late Thursday, Dell (Charts) reported lower quarterly earnings that

topped estimates on lower quarterly revenue that missed estimates. The

company also cautioned that growth and profit margins will be limited

during the next few quarters. The stock inched higher Friday.

 

AIG (up $2.45 to $69.86, Charts) reported higher quarterly earnings

late Thursday that nonetheless missed analysts' forecasts. The Dow

component also said it would buy back $5 billion in stock in 2007 as

part of a broader $8 billion stock buyback plan. The shares rallied

3.6 percent Friday.

 

Novell (down $0.24 to $6.47, Charts) reported a quarterly loss late

Thursday, down from a profit a year ago. Analysts were expecting a

1-cent-a- share profit, on average. Shares of the software-maker sank

4 percent Friday morning.

 

Shares of Palm (Charts) rallied amid reports that the maker of the

Treo smart phone could be the subject of a takeover attempt by Nokia

(Charts).

 

Among other movers, a variety of Internet shares fell, including eBay

(down $0.87 to $31.06, Charts), (down $0.36 to $30.50, Charts)

and Google (down $7.23 to $441.00, Charts).

 

On the economic front, investors eyed the revised reading on February

consumer sentiment from the University of Michigan. The index fell to

91.3 from the originally reported 93.3. Economists surveyed by

Briefing.com thought it would hold steady.

The risk in subprime defaults

 

Also in focus: comments from Fed speakers. St. Louis Federal Reserve

Bank President William Poole, speaking at a business luncheon in

Santiago, Chile, said the economy was not headed for a recession.

 

Poole's comments were in contrast to comments made by former Fed

Chairman Alan Greenspan, who said earlier in the week that a recession

was possible, though not likely, later this year.

 

Fed Chairman Ben Bernanke speaks at Stanford University in California

this evening.

 

In currency trading, the dollar fell further versus the euro and the

yen. The yen surged anew as investors continued to close out carry

trades, or bets on riskier currencies, bought by borrowing in the

currencies of countries with low interest rates, like Japan.

 

Treasury prices inched higher, lowering the yield on the benchmark

10-year note to 4.52 percent from 4.55 percent late Thursday. Bond

prices and yields move in opposite directions.

 

U.S. light crude oil for April delivery fell 62 cents to $61.46 a

barrel on the New York Mercantile Exchange.

 

COMEX gold for April delivery slumped $21.90 to $643.20 an ounce.

 

Market breadth was negative. On the New York Stock Exchange, losers

beat winners 3 to 1 on volume of 1.2 billion shares. On the Nasdaq,

decliners topped advancers 3 to 1 on volume of 1.5 billion shares.