"We'll continue to do nothing until some kind of jolt comes our way," says Ken Sheinberg, head of listed trading at Cowen & Co., of the stock market. "What that jolt will be, anyone can make a guess at." Sheinberg says the much-needed remedy for aimless trading could come in the form of better- or worse-than-expected earnings updates, war-related news or economic data.
The start of military action on Taliban targets in the wake of the September 11 attack on sites in New York City and Washington, D.C. is weighing heavily on investors. The U.S., with Great Britain, are now in the midst of the third day of bombing. The air assault has so far claimed the lives of four Afghan workers for a U.N. mine-clearing program, according to news wires. Fear that terrorist groups will exact revenge on the U.S. or its allies is weighing on the markets.
"We were clearly in or near a recession and the country basically stood still for two weeks economically," says Henry Asher, president of Northstar Group, an investment advisory firm based in New York City. "Assuming we have order in the streets, I would expect that as we speak recessionary pressures are beginning to abate." Like many observers, Asher sees signs for a "V-shaped" recovery, noting that manufacturers' inventories have been reduced. Asher expects a return to normal business patterns three to six months from now.
Positive earnings news Tuesday could not cheer Wall Street as it begins the third-quarter earnings season. Among upbeat reports, semiconductor maker Microchip Technology (MCHP
) says it sees quarterly results at the high end of forecasts. First Data Corp. (FDC
), which provides the electronic networks used for most credit card purchases in the U.S., gained after saying quarterly operating profits rose 15%.
But bad earnings outlooks are omnipresent. Software firm Commerce One Inc. (CMRC
) said its third-quarter earnings and revenues would fall short of Wall Street estimates, blaming the economic slowdown and declining sales of its core e-commerce software.
Among other stocks moving Tuesday, mobile phone maker Motorola (MOT
) is under pressure before the release of its results after the close Tuesday. It is expected to report its third straight quarterly operating loss, amid a slowdown in cell phone sales and losses by its chipmaking unit.
Software giant Microsoft Corp. (MSFT
) pressured both the Nasdaq and the Dow indexes after the U.S. Supreme Court rejected the appeal of its antitrust case. A judge will now mull over penalties for the company's illegal protection of its market dominance.
U.S. retail sales fell sharply during the five weeks ended Oct. 6 as consumers slowed their spending after the attacks on the U.S., according to the weekly update on Redbook Retail Sales Average.
Oil cartel OPEC may cut production supply by 700,000 to one million barrels per day to boost falling oil prices, but the timing of such a move is yet unknown. OPEC wants to restore prices to a $25 per barrel target. Fears of recession have sent oil prices down 25% since September 11.
Equities have rallied from three-year lows reached after the assaults on the Pentagon and the World Trade Center as fears of recession and consequences of military response from the U.S. weighed on investors. But stocks have rebounded, buoyed by the Federal Reserve's ninth interest-rate cut this year and President Bush's promise of an economic stimulus package.
The Dow Jones industrial average lost 15.50 points, or 0.17%, to 9,052.44. The tech-heavy Nasdaq Composite Index dipped 35.78 points, or 2.23%, to 1,570.17. The broader Standard & Poor's 500 Index fell 5.69 points, or 0.54%, to 1,056.75.
U.S. Treasuries finished lower amid supply worries. The military action and gyrations in stocks will be the main focus, but traders will also look to the Treasury's decision about a five-year bond reopening, says S&P's economic research unit MMS. Both five-year and ten-year bonds are underperforming on the yield curve.
The calendar of economic news is light until late in the week when the government will release updates on wholesale inventories, import prices, the producer price index, and retail sales.
European markets finished mixed, as investors kept an eye to the ongoing attacks on Afghanistan. In London, the Financial Times-Stock Exchange 100 index ended off 22.90 points, or 0.46%, to 5,009.80. Germany's DAX Index lost 22.73 points, or 0.51%, to 4,472.42, amid reports that the German unemployment rate rose to 9.4% in September, from 9.3% in August. In France, the CAC 40 finished up 4.76 points, or 0.11%, to 4,176.97.
Stocks finished mixed in Asia. In Japan, the Nikkei 225 index, closed for trading Monday, lost 194.10 points, or 1.90%, to 10,011.77 on Tuesday, amid fears that retaliatory attacks on terrorist groups in Afghanistan by the U.S. and Great Britain would impact earnings. Meanwhile, Hong Kong's Hang Seng added 391.10 points, or 3.92%, to close at 10,358.93. By Amy Tsao in New York