War with Iraq is contributing to an already struggling economy.
By Amy Baldwin
AP Business Writer

NEW YORK – Capping a dreary first quarter, Wall Street suffered another sharp drop Monday amid fears of prolonged fighting in Iraq and a disappointing report on manufacturing in the Midwest. The Dow Jones industrials slid more than 150 points in the market’s fourth straight declining session.

The Dow and Standard & Poor’s 500 index ended the first three months of 2003 with substantial losses, while the Nasdaq composite index, which had fallen the most in the bear market, eked out a modest gain. The month of March, however, turned out to be positive for all three indexes.

Analysts said investors remain very concerned that the war will last for several months rather than a few weeks. Investors believe that the longer the fighting persists, the more conservative businesses and consumers will become in their spending, a threat to an already troubled economy.

The market’s glum mood was also due to developments in the war over the weekend, including a suicide attack that killed four American soldiers on Saturday.

“It is just hard to find buyers. Not a lot of people are willing to step up to the plate,” said Bryan Piskorowski, market commentator for Prudential Securities. “For the most part, it is all Iraq all the time, but you also have soft economic data ahead of quarterly earnings warnings. That triumvirate is hard to overcome here.”

The Dow closed out Monday’s trading down 153.64, or 1.9 percent, at 7,992.13, amassing a four-day loss of 288.10.

The broader market was also sharply lower. The Nasdaq sank 28.43, or 2.1 percent, to 1,341.17. The S&P fell 15.32, or 1.8 percent, to 848.18.

But some optimism earlier in the month, when investors sent stocks rallying on hopes that war would be short, enabled the indexes to end the month with gains. The Dow rose 1.3 percent, the Nasdaq advanced 0.3 percent and the S&P increased 0.8 percent.

Stocks finished the first quarter mostly lower. The Dow gave up 4.2 percent and the S&P shed 3.6 percent, although the Nasdaq gained 0.4 percent.

“Now most (investors) understand that the war will be longer than expected and investors continue to be noncommittal,” said Thomas F. Lydon Jr., president of president of Global Trends Investments in Newport Beach, Calif.

Monday’s economic news was a big blow to the market. The Purchasing Management Association of Chicago reported that its index of business activity fell to 48.4 in March on a seasonally adjusted basis from 54.9 in February. Not only was the reading much weaker than economists predicted, but because it came in below 50, it indicated a contraction in business activity.

The index is considered a harbinger of the Institute for Supply Management’s national survey on manufacturing, due to be released Tuesday.

Analysts said fears about the wobbly economy stand to deepen as companies begin revising their first-quarter earnings estimates, with many bound to cut their outlooks in light of the war.

Retailers were among the market’s losers, stumbling on an array of disappointing news. Nordstrom fell $1.12 to $16.20 after issuing a first-quarter profit warning, while Federated Department Stores declined 50 cents to $28.02 after saying March sales will miss analysts’ expectations. And Wal-Mart fell $1.10 to $52.03 after warning that its March sales will be at the low end of estimates.

Bad news also hurt Altria, down $2.17 at $29.96 and one of Wall Street’s biggest decliners. The company’s Philip Morris USA unit said it can’t raise the money to post a $12 billion court-ordered bond needed to appeal an Illinois tobacco case. Standard & Poor’s Corp. said that if the bond requirement isn’t drastically reduced, Philip Morris “might have to consider bankruptcy as an option.”

Wall Street’s losses were spread across sectors, an indication that investors are extremely nervous. IBM fell $2.42 to $78.43, Boeing tumbled $1.04 to $25.06 and American Express declined 99 cents to $33.23.

Brokerage house downgrades gave investors yet another reason to sell individual stocks. Taiwan Semiconductor fell 56 cents to $6.84 after Deutsche Securities lowered its recommendation on the chip maker to “sell” from “hold.”

Declining issues outnumbered advancers more than 3 to 2 on the New York Stock Exchange. Consolidated trading was light as it has been for weeks with volume at 1.82 billion shares, compared with 1.51 billion on Friday.

The Russell 2000 index, which tracks smaller company stocks, fell 4.16, or 1.1 percent, to 364.54.

Overseas, Japan’s Nikkei stock average finished Monday down 3.7 percent. In Europe, France’s CAC-40 dropped 4.2 percent, Britain’s FTSE 100 fell 2.6 percent and Germany’s DAX index slid 3.9 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

AP-ES-03-31-03 1746EST