Stocks slip on economic woes

  • Business
  • Sunday, 18 May 2003

NEW YORK: Stocks slipped on Friday after reports showed that consumer prices and housing starts fell in April, raising questions about the economy's health and prompting investors to rein in their recent stock-buying spree. 

The broad Standard & Poor's 500 index has surged 18% since mid-March in a rally that carried it to its highest levels in nearly nine months this week and helped it rack up its first five-week winning streak since last summer. 

“A lot of this move over the past five or six weeks has been driven by better-than-expected earnings.  

“Now that we have run the course of the earnings period, people are starting to wonder what will be the catalyst to take us out of this trading range to higher levels,” said David Memmot, head of listed block trading at Morgan Stanley. 

But investors, fearful of getting left behind if the economy begins to gather speed, have been willing to nibble at stocks on any dips in the market. Among those attracting attention was Sun Microsystems, which gained 26 cents, or 6%, to US$4.30. 

The tech-laced Nasdaq Composite slid 12.85 points, or 0.83%, to 1,538.53, according to the latest available data, a day after hitting its highest close since June.  

The blue-chip Dow Jones industrials fell 34.17 points, or 0.39%, to 8,678.97. The S&P 500 sagged 2.37 points, or 0.25%, to 944.30, a day after ending at its highest level since late August. 

Still, the S&P 500 managed to gain 1.2% for the week. The Nasdaq Composite also etched out a fifth week of gains with a similar 1.2% rise, a feat it last accomplished in November 2001.  

The Dow climbed for a third week in a row, edging up 0.9% for the week. 

A sharp drop in energy costs pulled consumer prices down in April, and even without energy costs, prices were flat.  

The data fanned fears that falling prices might dent corporate profits, after the US producer price index on Thursday showed a record drop last month. 

A separate report revealed that the once robust housing market cooled during the month.  

US housing starts fell a surprising 6.8% in April on a drop for multifamily home starts, the government said. 

Investors largely brushed off a report from the University of Michigan showing that US consumer confidence rose more than expected in early May, traders said. 

Dell Computer Corp pressured the market, dropping 99 cents, or 3%, to US$31.19, as investors expressed disappointment that its results and outlook did not exceed expectations. 

Analysts said the company needed to indicate faster growth to justify the recent rise in its stock to 2½-year highs. 

Chip equipment makers like Applied Materials, down 58 cents at US$14.31, sagged after a trade group said on Thursday that orders for semiconductor production and testing equipment from North American manufacturers dropped in April. 

The expiration this weekend of stock and stock index options was also making for choppy trading, analysts said. 

AOL Time Warner Inc shareholders on Friday approved the media company's board slate. Its shares rose 26 cents to US$14.24. 

Drug maker Wyeth fell US$1.12, or 2.5%, to US$43.18. The company said far more patients than it expected are threatening to seek damages, alleging they were harmed by its recalled fen-phen diet drugs, increasing uncertainty about the company's financial liability. – Reuters  

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