On Saturday, a Chinese fighter and a U.S. surveillance aircraft collided. The fighter crashed and the 24 man U.S. EP-3 craft landed on an island in the Chinese province of Hainan where it is being held. Some analysts pointed to heightened U.S.-Sino tensions, and President Bush's demands that China grant immediate access to the crew of the U.S. spy plane, as a cause for today's sell-off.
The latest scuffle with China could create added uncertainty, but as it stands, there is plenty to worry over - China or no. "The China situation certainly doesn't help," says Jim Lucier, an economist with Prudential Securities. "But we had plenty of selloffs prior to today without the benefit of a China scare. The point is that visibility - the ability to see what's happening in the next quarter or two is very limited."
Continued bad news and profit warnings from companies big and small spooked investors anew, sending the major indexes lower. Shares of financial services giant American Express Co. (AXP
) stumbled after it warned that first quarter earnings would fall 18% from the year-ago quarter. Weakness in the Dow component capped modest gains for the Dow index.
Another Dow member, top U.S. chemicals maker Dupont (DD
) added to the sad state of corporate health after it announced plans to cut its global workforce by 4%, reduce contract personnel by about 1,300 and shut down less competitive manufacturing assets. JP Morgan upgraded the stock to buy from market perform.
Despite a strong morning in which investors took solace in the strengthening numbers in manufacturing and housing, the Dow reversed direction in mid-day trading. These recent data served as signs that so-called "Old Economy' stocks could escape some of the problems facing tech companies, says Jay Suskind, director of equity trading at Ryan Beck & Co.
The March report from the National Association of Purchasing Management, which surveys manufacturers, came in higher-than-expected. The figure surprised the Street, after Friday's read on the Chicago PMI, a regional manufacturing gauge, showed weaker than expected numbers.
The Dow index was bruised in afternoon trading, losing 110.91 points, or 1.12%, to 9,767.87. The Standard & Poor's 500 index lost 16.17 points, or 1.39%, to 1,144.16. The tech-heavy Nasdaq composite was at a 29-month low, down 57.42 points, or 3.12%, to 1,782.84.
U.S. treasuries ended lower after a stronger than expected NAPM report was released, indicating the economy may be snapping back from recent weakness. Spending on construction was also higher than expected, rising 0.6% in February, exceeding analysts' expectations of a 0.2% rise.
Stocks in the News
Insurance giant Allianz (AZ
) said it plans to make an exchange offer to shareholders of Dresdner Bank valued at 53.13 euros per Dresdner share.
Data services provider to the advertising industry Acxiom Corp. (ACXM
) cut its fourth quarter guidance. Morgan Stanley Dean Witter downgraded the stock to underperform and Credit Suisse First Boston downgraded the stock to hold from buy. CIBC World Markets cut estimates and its target price.
i2 Technologies Inc. (ITWO
), a business-to-business commerce software maker, said it may cut about 10% of its work force and cut its earnings forecast as a result of economic uncertainty, which is causing customers to delay purchases.
Stocks markets in Europe finished mixed. In London, the Financial Times-Stock Exchange 100 index ended down 15.20 points, or 0.27%, to 5,618.50. In Germany, the DAX Index ended down 69.19 points, or 1.19%, to 5,760.76. In Paris, the CAC 40 finished up 30.03 points, or 0.58%, to 5,210.48.
Asian markets finished on a down note. In Japan, the Nikkei 225 closed down 61.84 points, or 0.48% at 12,937.86. In Hong Kong, the Hang Seng closed down 33.34, or 0.26%, to 12,727.30.
U.S. officials insisted a Navy surveillance plane that landed on China's Hainan Island after a midair collision with a Chinese fighter was sovereign U.S. territory -- and urged Beijing to quickly return the aircraft and its 24-member crew: Reuters.
Yugoslavia moved to build a wide-ranging criminal case against Milosevic, lifting the biggest obstacle to the country's relations with the West. The former president turned himself in after a 26-hour armed standoff with police: WSJ.
Merck is to release data on its AIDS vaccine, which went into human trials in February. The drug has generated exci By Amy Tsao in New York