NEW YORK (AP):
WALL STREET pulled back Wednesday after investors' elation about a quick end to the war with Iraq dissolved into concerns about corporate profits. Stocks tumbled sharply with the Dow Jones industrials forfeiting 100 points.
"The market has been absolutely thrilled about an imminent end for arguably (these) first three weeks of the war. We started the stock rally before the war started," said Arthur Hogan, chief market analyst at Jefferies & Co.
"Unfortunately, when investors stop celebrating they will have to focus on corporate profits, which may not be so jubilant," he said.
The Dow closed down 100.98, or 1.2 per cent, at 8,197.94.
The broader market also fell. The Nasdaq composite index dropped 26.20, or 1.9 per cent, to 1,356.74. The Standard & Poor's 500 index fell 12.30, or 1.4 per cent, to 865.99.
Wall Street welcomed news from the U.S. military that Saddam Hussein's government is no longer in control of Baghdad and TV footage showing joyous crowds swarming the city and defacing images of Saddam.
But the market's ability to advance was impeded by first-quarter earnings, which companies began releasing this week. Profits are expected to be mostly disappointing, due to the detrimental effect of the war on the economy and in turn, corporate performance.
Wall Street has failed this week to gain upward momentum despite encouraging news on the war front, including rumors Tuesday that Saddam was dead. The Dow dipped 1.49 Tuesday, having risen a modest 23.26 on Monday.
"For weeks, the only game in town was Iraq. We have gotten to the point where it is not over but in the last quarter. Investors are now looking for the next thing that will drive the market," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "The economy is still not good. For the past few weeks, we were able to ignore that as the market focused on success in Iraq."
While investors will likely send certain shares lower when first-quarter earnings disappoint them, stocks are more vulnerable to weak predictions about the second quarter, which companies are likely to make, citing higher energy costs and decreased consumer spending in the wake of the war.
"The market needs to hear that the next quarter is it," said Johnson, referring to a return to profitability. "Unfortunately,
the current events in the market are going to keep that from happening."
Yahoo! dropped 94 cents to $22.87 ahead of its results due later Wednesday. But after the market closed, the Internet company reported quarterly earnings that beat Wall Street's estimates by 2 cents a share and it raised its 2003 outlook. Yahoo gained 48 cents in the after-hours trading session.
Federated Investors rose $1.25 to $27.40. The financial services company is replacing Pharmacia, down 63 cents at $44.33, in the S&P 500 index.
Declining issues outnumbered advancers 3 to 2 on the New York Stock Exchange. Volume was light at 1.28 billion shares, compared with 1.21 billion on Tuesday.
The Russell 2000 index, the barometer of smaller company stocks, fell 2.38, or 0.6 per cent, to 372.28.
