Markets & Finance

Stocks Finish Solidly Lower


Stocks fell Tuesday amid poor earnings outlooks and fear the U.S. is getting closer to war with Iraq. Many traders were pulling back after the early January rally, notes S&P MarketScope.

The Dow Jones industrial average was down 143.50 points, or 1.67%, to 8,442.90. The broader Standard & Poor's 500-stock index lost 14.16 points, or 1.15%, to 887.62. And the tech-laden Nasdaq composite index fell 11.95 points, or 0.87%, to 1,364.25.

Earnings updates are the main attraction this week. So far, investors haven't been impressed with the results or outlooks offered by blue chip companies such as Microsoft (MSFT), Home Depot (HD), and General Electric (GE).

After the market close Tuesday, Motorola (MOT) will report quarterly results.

On Wednesday, Pfizer (PFE), Texas Instruments (TXN), Qualcomm (QCOM), Merrill Lynch (MER), JP Morgan Chase (JPM), and Eastman Kodak (EK) are among the big names scheduled to report results .

On Tuesday, some better-than-expected earnings reports failed to lift the market. Financial giant Citigroup (C) posted fourth-quarter EPS of 47 cents, vs. 69 cents a year ago, despite flat revenues. The EPS figure includes a previously-announced $1.3 billion aftertax charge, and was a penny higher than analysts expected.

Fellow Dow component 3M (MMM) reported fourth-quarter EPS of $1.29, vs. 96 cents a year ago, on a 7.3% revenue rise. The company, which makes Scotch tape and Post-it notes, sees EPS of $1.38 to $1.43 in the first-quarter and $5.80 to $6.00 in 2003. The fourth-quarter earnings were better than expected.

Another Dow member, Johnson & Johnson (JNJ), reported fourth-quarter EPS of 48 cents, vs. 36 cents, on a 14% sales rise (including foreign exchange).

Harley-Davidson (HDI) fell despite posting stronger-than-expected fourth-quarter results. The motorcycle maker reported EPS of 49 cents, vs. 39 cents, on a 14% revenue rise. S&P dowmgraded the stock to hold from accumulate, noting that Harley-Davidson did not raise 2003 production guidance for its popular bikes, and the companyy is likely to face tougher sales and profit comparisons as excitement related its 100th anniversary fades.

In merger news Tuesday, First Virginia Banks (FVB) agreed to be acquired by BB&T (BBT) in a $3.38 billion stock swap. The deal values First Virginina at $47.09 per share.

EchoStar (DISH) Charles Ergen has been talking with Rupert Murdoch's News Corp. (NWS) about possibly selling his satellite company, according to the Wall Street Journal.

And Energizer (ENR) says it will acquire the Schick-Wilkinson Sword razor business from Pfizer (PFE) for $930 million.

In the tech sector, Electronic Data Systems (EDS) shares fell after the company says the SEC's previously announced informal inquiry has moved to a formal investigation.

In economic news, housing starts jumped 5.0% to a 1.835 million unit pace in December from an upwardly revised 1.747 million pace in November (up from 1.697 million). Permits rose 8.2% in December. The starts data are well above median expectations of a 1.68 million unit pace and continue to outpace expectations due to low mortgage rates, says economic research outfit MMS International. The 2002 tally of 1.705 million units was the highest level since June, 1986 (1.847 million), MMS notes.

On Wednesday, the Treasury will announce its budget for December. The rest of the week is very quiet on the economic news front.

Meanwhile, besides the ongoing tensions with Iraq, the market kept an eye on reports of a possible end to the energy workers' strike in Venezuela. Crude oil futures were lower on Tuesday.

Treasury Market

Treasuries finished modestly higher in price as stocks remained weak. MMS International says statements from President Bush led to increased safety demand, as he made fresh hostile remarks about Saddam Hussein not disarming.

MMS notes that last week's decisive rally in the Treasury market sets the stage for some profit-taking, but geopolitical concerns will continue to provide support as a range trade grips the market for the holiday-shortened week. The absence of market moving economic data should result in lackluster trading this week.

World Markets

European stocks were lower. Oil shares declined after Goldman Sachs lowered its earnings estimate for Shell Transport & Trading, according to Bloomberg. But Vodafone Group and Deutsche Telekom gained after analysts raised recommendations on the large telephone companies.

London's FTSE index ended down 41.90 points, or 1.11%, to 3,736.70. In Paris, the CAC-40 index lost 27.68 points, or 0.92%, to 2,992.39. In Frankfurt, the DAX index fell 22.98 points, or 0.79%, to 2,870.57.

In Asia, stocks finished higher. Japan's Nikkei 225 index rose 149.76 points, or 1.75%, to 8,708.58. Meanwhile, Hong Kong's benchmark Hang Seng gained 16.45 points, or 0.17%, to 9,568.47.


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