NEW YORK: Stocks slumped on Friday while bonds rose as gloomy corporate news and a report showing anaemic US economic growth sent investors in search of a safe haven.
Gold prices ended lower despite stock investors’ disappointment with first-quarter growth in US gross domestic product and the embattled dollar’s failure to sustain a morning recovery.
In New York, crude oil futures prices fell for the fourth day in a row as a skeptical market considered OPEC’s decision Thursday to raise official output limits while cutting some production above quota.
The tone was set for the day when the Commerce Department reported that gross domestic product, the broadest measure of the US economy’s health, grew at an annualised rate of 1.6% in the first quarter, up marginally from the fourth quarter’s 1.4%, but well below economists’ forecasts for growth of around 2.3%.
Private consumption, government spending and business investment all came in softer than expected and only a contribution from international trade saved the result from being even grimmer.
“All the surprises in this report were on the downside, which is exactly the opposite of what we were hoping for,” said James Glassman, senior economist at J.P. Morgan, adding that the economy seemed to have less momentum than many thought.
The blue-chip Dow Jones industrials fell 133.69 points, or 1.58%, to 8,306.35. The broad Standard & Poor’s 500 index lost 12.62 points, or 1.38%, to 898.81. The technology-packed Nasdaq Composite index dropped 22.69 points, or 1.56%, to 1,434.54, based on the latest available figures.
Chip makers like Intel Corp ranked as the biggest losers in the market after a sour brokerage call on the key semiconductor sector. Intel slipped 67 cents or 3.5% to end at US$18.28 and ranked No. 2 among the Nasdaq’s most-active shares.
R.J. Reynolds Tobacco Holdings Inc, the No. 2 US tobacco company, sank 17.6% to US$28.18 after slashing full-year profit estimates while Ford Motor Co General Motors Corp dropped after an investment bank cut its ratings on the automakers. Ford’s stock fell 54 cents or 5% to US$9.96 and was among the NYSE’s most-active issues. GM’s shares shed US$1.04 or 2.8% to US$35.62.
“Stocks are stuck in profit-taking mode as weak economic and earnings reports bring some more position paring at the week’s end,” Bryan Piskorowski, an analyst at Prudential Securities, said.
For the week, the Dow fell 0.38%, the Nasdaq gained 0.63% and the S&P 500 index advanced 0.59%.
Growing anxiety over the deadly SARS virus has also given investors an excuse to lock in profits after the market’s recent run, traders said. SARS has killed more than 270 people worldwide and infected about 4,600. The crisis has prompted the World Bank to trim its growth forecast for East Asia.
Trading was moderately heavy with about 1.32 billion shares traded on the New York Stock Exchange and 1.51 billion shares changing hands on Nasdaq.
This week marked the busiest period of the first-quarter earnings season, and many companies posted results that beat Wall Street’s expectations. Others, however, missed estimates or warned of tough conditions ahead.
The market has climbed since mid-March, but investors are still worried over the health of the US economy.
The perilous state of the labour market should be underlined next week when the April payrolls report is released. A run of dismal weekly jobless claims has analysts looking for a decline of around 53,000, bringing jobs lost in the last three months to over half a million.
In the US Treasury market, the benchmark 10-year note gained 11/32 to 99-30/32, taking its yield down to a three-week low of 3.88% from 3.93% late on Thursday.
The 30-year bond gained 13/32 to 108-17/32, giving its yield a nudge down to 4.82% from 4.84% late on Thursday.
Late Friday afternoon in New York, the dollar was trading at 120.16 yen, up 0.16% from 119.97 yen the previous day. The euro bought US$1.1033, up just a touch from US$1.1030 late Thursday in New York.
On the New York Mercantile Exchange, crude oil for June delivery dropped 38 cents to settle at US$26.26 a barrel, after falling to a session low of US$26.
On the Commodity Exchange, gold for June delivery fell US$1.40 to end at US$333.70 an ounce after trading between US$335.10 and US$332.80. It tried to rally at midday as the dollar weakened, but could not break to the upside for the day.
Overseas, London’s FTSE Eurotop 300 index slid 1.3% to end at 807.36 points.
In Tokyo, the Nikkei average ended at a 20-year low, falling 1.97% to finish at 7,699.50 after Sony Corp unveiled a hefty first-quarter loss and amid continued worries about the spread of the SARS virus. – Reuters