Stocks reversed course late in Tuesday's session to finish in the red. The turnaround came after news of a radio address, apparently from Osama bin Laden, calling for unity among all Arabs, including Iraqis, in an uprising against the U.S. and Israel. Earlier, stocks had registered modest gains after some lukewarm comments on the economy from Federal Reserve Chairman Alan Greenspan, who spoke to the Senate Banking Committee Tuesday morning.
The Dow Jones industrial average finished the day down 77 points, or 0.97%, to 7,840.11, while the broader Standard & Poor's 500-stock index fell 6.76 points, or 0.81%, to 829.21. The tech-laden Nasdaq composite index fell 1.17 points, or 0.09%, to 1,295.51.
The Al-Jazeera Arab satellite station broadcast a new audio statement purported to be from Osama bin Laden in which he expresses solidarity with the Iraqi people, according to wire-service reports.
The radio clip overshadowed Greenspan's appearance. The Fed chief said he remains optimistic on prospects for growth if a war with Iraq is averted. Yet he emphasized the "considerable uncertainties" in the economy in the near term. He said that the lingering threat of war with Iraq is hanging heavy over the economy. Still, "the economy has shown remarkable resilience in the face of substantial blows," he added.
Of particular interest was his take on the Bush administration's stimulus plan, according to MMS. Greenspan said he supports the elimination of taxes on dividends, but not without also considering the effect on budget deficits.
Says Trip Jones, senior vice president of Fulcrum Global Partners: "He finally admitted to the dark side of productivity in that it negatively impacts employment."
There were no economic data of major significance released Tuesday -- only the weekly chain store sales, which were unchanged for the week ended Feb. 8, MMS International notes.
Later this week, investors will have more key data to sift through. On Thursday: January retail sales data, import and export prices, and initial jobless claims for the previous week. On Friday: December business inventories, industrial production for January and the University of Michigan consumer sentiment gauge.
Though first-quarter earnings season is winding down, many companies are releasing reports this week. Clorox (CLX
), Aetna (AET
), and WellPoint (WLP
) all reported positive earnings gains before the opening bell Tuesday.
The tech outlook was mixed Tuesday. After the market closed, bellwether chip-equipment supplier Applied Materials (AMAT
) disappointed on both the revenue and earnings front Tuesday for the quarter ending in January. Net sales totaled $1.05 billion, up 5% from a year ago but down 27% from the prior quarter. That's worse than Applied's prediction for a 20% decline and slightly short of Wall Street expectations for $1.15 billion in revenues. In a statement, the company said it doesn't yet see a near-term pickup in capital spending.
Indeed, a report earlier in the day from Goldman Sachs estimated that capital spending will decline 10% this year compared to a 16% drop in 2002.
But tech did offer some bright spots: Corning (GLW
) Chief Financial Officer Jim Flaws says the fiber-optic cable company, whose stock hit a nadir of around $1 last October, will begin reporting a profit again in the third quarter of this year. The company has slashed capacity and cut costs so drastically that even without a pick-up in capital spending among companies this year, Corning can still return to net earnings later in the year, Flaws said.
And wireless communications company Qualcomm (QCOM
) announced that it follow Microsoft's (MSFT
) lead by initiating a quarterly dividend. Qualcomm's dividend will initially be 5 cents a share. Its board also approved a common stock buyback of up to $1 billion.
Rounding out this week's earnings calendar, Coca-Cola (KO
) and Medtronic (MDT
) are expected to report on Wednesday. Thursday brings releases from Nvidia (NVDA
) and Calpine (CPN
), while on Friday, Navistar International (NAV
) is set to post results.
U.S. Treasuries ended solidly higher in price Tuesday after a late burst of buying reversed earlier losses. While prices sagged in the wake of Greenspan's testimony, in the end the markets couldn't overcome the dominance of geopolitical factors -- stocks weakened on news of another bin Laden tape, and Treasuries gained amid a curve steepening trade. The Treasury auctioned off 5-year notes Tuesday and will auction 10-year notes Wednesday.
European stocks were trading higher Tuesday. London's FTSE index is up 90.10 points, or 2.5%, to 3669.20, while Paris' CAC 40 index up 69.58 points, or 2.5%, to 2841.84. In Frankfurt, the DAX index climbed 40.91 points, or 1.58% to 2,627.
In European company news, BP (BP
), Europe's second- largest oil company, agreed to pay $6.75 billion for a 50 percent stake in Russia's third-largest oil producer, a venture to be formed with owners of OAO Tyumen Oil Co.
In Asia, stocks were generally lower. Markets in Japan were closed Tuesday for the National Foundation Day holiday. On Monday, the Nikkei 225 index gained 36.77 points, or 0.44%, to close at 8484.93. On Tuesday, Hong Kong's benchmark Hang Seng lost 37.23 points, or 0.40%, to 9,194.91.