The Dow Jones industrial average was down 84.94 points, or 1.08%, to 7,758.17, while the broader Standard & Poor's 500-stock index fell 10.52 points, or 1.27%, to 818.68. The tech-laden Nasdaq composite index fell 16.52 points, or 1.28%, to 1,278.94.
Losses worsened in the afternoon following CIA Director George Tenet's testimony before Congress warning of the increasing threat of terrorism on U.S. soil. The U.S. strengthened air defenses around Washington amid the heightened terrorism concerns. On Tuesday, a radio address, apparently from Osama bin Laden, called for unity among Muslims, including Iraqis, in an uprising against the U.S. and Israel.
Also pressuring stocks, the Bush Administration continued making its case for an attack on Iraq. Secretary of State Colin Powell declared "the moment of truth" was fast approaching for Iraq.
Federal Reserve Chairman Alan Greenspan wrapped up his appearance before the House Financial Services Committee, the second leg of his semi-annual testimony on monetary policy. He used the identical text to the House Financial Services Committee that he delivered Tuesday to the Senate Banking Committee.
Several major industry leaders reported earnings Wednesday.
Coca-Cola Co. (KO
) said fourth-quarter net income rose 1.8%, helped by sales of Vanilla Coke. Net income increased to $930 million, or 38 cents a share, from $914 million, or 37 cents, in the year-earlier period. Sales rose 13% to $4.8 billion. The company also said it will take a $400 million pre-tax charge this year as it combines the North American soda and juice businesses.
General Motors (GM
) is under pressure on unconfirmed speculation that GM may reduce its dividend on lower free cash flow and higher pension costs. The stock is down 30% for the year. Banc of America Securities issued a sell rating on the stock.
), the owner of CBS, MTV, and Paramount Studios, said Wednesday that net income reached $652.4 million, or 37 cents a share, compared with a net loss of $42.5 million, or two cents a share, a year earlier. Analysts surveyed by Thomson First Call had expected the company to earn 34 cents a share for the latest period. Still, the stock fell 2.6% in trading.
Network Appliance (NTAP
), the maker of computer data storage systems said revenues in the fourth quarter ending in April will be $233 million to $242 million. It had been expected to have revenues of $232.7 million, the average estimate of analysts polled by First Call.
And Cox Communications (COX
) swung to a fourth quarter profit thanks to strong gains by its high-speed Internet and digital telephone services. Revenue rose 18%.
Fox Entertainment Group (FOX
) and News Corp. (NWS
) also reported earnings Wednesday. Rupert Murdoch's empire beat earnings estimates. News Corp. jumped 2.4%, but Fox fell 0.8% in trading.
), Europe's largest drugmaker, said fourth-quarter profit fell 4.1% because the U.S. dollar declined in value and demand waned for the antibiotic Augmentin, which is facing generic competition.
Thursday brings releases from Nvidia (NVDA
), Calpine (CPN
), American International Group (AIG
), Campbell Soup (CPB
), Dell Computer (DELL
), and Office Depot (ODP
On the economic data front, January retail sales data will be released, as will 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 will be released.
U.S. Treasuries rallied as terrorism and war worries prompted investors to seek the relative safety on government debt. Traders were encouraged by decent results of Wednesday's auction of $18 billion in 10-year Treasury notes. The notes were awarded at 3.960%, a little below expectations. "A major flight to safety could send Treasury (yields) to new record lows," says The Bank Credit Analyst.
European stocks fell solidly lower as the Bank of England said the risk of war in Iraq will stunt economic growth in the region's second-largest economy. Axa, Europe's second-biggest insurer, fell after Standard & Poor's lowered its credit rating.
London's FTSE index was down 53.1 points, or 1.45%, to 3616.10, while Paris' CAC 40 index fell 71.22 points, or 2.51%, to 2770.62. In Frankfurt, the DAX index fell 55.75 points, or 2.12% to 2,571.25.
Royal Philips Electronics (PHG
), Europe's largest consumer electronics maker, declined after Goldman Sachs slashed its 2003 earnings forecast by a third. Cadbury Schweppes (CSG
), the world's third-biggest soft-drinks maker, sank after saying it expects to miss its own earnings targets.
In Asia, stocks finished higher. On Wednesday, the Nikkei 225 index gained 179.24 points, or 2.11%, to close at 8664.17. Hong Kong's benchmark Hang Seng climbed 119.99 points, or 1.30%, to 9,314.90.