Stocks slide on weak US$, Dow takes biggest plunge in two months

NEW YORK (AP) - Wall Street suffered its biggest decline in nearly two months Monday as investors grew nervous that a declining dollar would dampen foreign investment in the United States.  

The Dow Jones industrials slid 185 points. 

Analysts said a U.S. Supreme Court ruling that could force drug manufacturers to lower prices in Maine also prompted investors to cash in profits after several weeks of gains. 

Light volume, meanwhile, accentuated price swings. 

"The concern is that foreign investors could be selling U.S.-based holdings and going overseas with their investment capital,'' said Jim Russell, director of core equity strategy for Fifth-Third Bank in Cincinnati. 

"We also think the market is down because it has had such a strong run-up post-war,'' he added. 

"The market is ready for a pause. ... We would expect a pullback of modest proportions over May and June.'' 

The Dow closed down 185.58, or 2.1 percent, at 8,493.39, having gained 0.9 percent last week to post its third winning week. 

It was the biggest point decline since March 24, when the blue chips lost 307 points; still, the Dow was trading at levels seen a little more than a week ago. 

The broader market also finished lower. 

The Nasdaq composite index fell 45.76, or 3 percent, to 1,492.77, also the biggest drop since March 24, when the index declined 52 points.  

That came after last week's advance of 1.2 percent, the index's fifth straight week of gains. 

The Standard & Poor's 500 index dropped 23.53, or 2.5 percent, to 920.77, after rising 1.2 percent to also notch its fifth winning week. 

It was also the biggest one-day loss since March 24, when the index fell 31 points. 

The dollar slid to multiyear lows against the euro and the Japanese yen after U.S. Treasury Secretary John Snow over the weekend called the dollar's recent losses "fairly modest.''  

He added that market fundamentals should determine the dollar's value. 

Disappointing retail sales also weighed on stocks. 

Lowe's dropped $4 to $40.30 after the second-largest U.S. home improvement chain reported first-quarter earnings that beat analysts' expectations by a penny; however, its same-store sales fell below the company's estimates. 

Home Depot, Lowe's rival and a Dow component, also fell on the news, dropping $1.12 to $28.07; the company reports its quarterly earnings Tuesday. 

The latest report on economic activity, meanwhile, failed to soothe investors. 

The Conference Board said Monday its Index of Leading Economic Indicators rose by 0.1 point last month to 110.6, suggesting tepid post-war growth. 

The reading met analysts' expectations. 

Stocks have surged in recent weeks after the end of the war with Iraq and an encouraging first-quarter earnings season. 

But analysts have cautioned that stocks would likely see declines on profit-taking unless investors saw strong signs of an improving economy. 

"I do think we will continue to see a trading range environment'' with the Dow moving up and down about 5 percent from present levels, said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, North Carolina. 

"Investors need to see evidence of a stronger economy, or we need a leadership sector to carry us into another bull phase,'' he said. 

Drug stocks were among the big losers Monday after the Supreme Court ruled Maine could begin a novel plan to force drug manufacturers to lower prices on prescription drugs; however, the court cautioned that the program might not survive future legal challenges. 

Pfizer dropped $1.81 to $31.80, while Merck fell $2.80 to $56.65 and Johnson & Johnson declined $1.41 to $54.63. 

Bristol-Myers Squibb lost $1.37 to $24.45 after The New York Times also reported that a federal probe into the drugmaker's financial statements might be deeper than revealed. 

Gainers included Genentech, which surged $16.95, or 44.7 percent, to $54.85, after the biotech company said its drug Avastin helped the survival of cancer patients in a Phase III trial. 

Declining issues outnumbered advancers nearly 3 to 1 on the New York Stock Exchange. 

Volume was light at 1.35 billion shares, compared with 1.51 billion traded Friday. 

The Russell 2000 index, a barometer of smaller company stocks, fell 6.37, or 1.5 percent, to 408.32. - AP 

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