The Dow Jones industrial average fell 8.78 points, or 0.11%, to 7,749.39, while the broader Standard & Poor's 500-stock index fell 1.38 points, or 0.17%, to 817.30. The tech-laden Nasdaq composite index fell 1.53 points, or 0.12%, to 1,277.44. The major indexes fell to four-month lows before rallying back after 2:00 p.m. ET.
The release of better-than-expected economic reports Thursday wasn't enough to overcome geopolitical jitters. U.S. retail sales slumped 0.9% in January following a revised 2.0% rise in December (from up 1.2% previously). Excluding automobiles, sales rose 1.3% from a revised December gain of 0.2% (from unchanged previously). The headline figure was pretty much in line with expectations, but the ex-autos figure was a little stronger, notes economic forecasting outfit MMS International.
"Consumers are less aggressive than during the late 1990s, but are still spending at a healthy clip," The Bank Credit Analyst said.
Meanwhile, U.S. initial jobless claims fell 18,000, to 377,000, in the week ended Feb. 8. Despite the decline, the four-week moving average rose 3,000 to 389,000.
But the encouraging economic news came against a backdrop of rising war and terrorism fears. Experts determined that an Iraqi missile exceeds the maximum 93-mile range allowed under U.N. resolutions. And Britain's two main airports were hit by security alerts amid intelligence-led fears that London and Washington could be targeted by al Qaeda, according to wire-service reports.
A conflict with Iraq, combined with President George W. Bush's plan to cut taxes, will increase the U.S. budget deficit to a record $375 billion in 2003, according to Goldman Sachs, one of the 22 firms that trade with the Federal Reserve. The U.S. must attract about $1.4 billion in foreign investment a day to offset the shortfall in its current account, which measures international trade, Goldman reported.
The dollar fell in currency trading on speculation that chief U.N. weapons inspector Hans Blix will report tomorrow that Iraq has failed to reveal banned weapons, increasing the risk of war and damping demand for U.S. assets.
Technology shares may get a lift in Friday's session from the latest earnings update from Dell Computer (DELL
). After the closing bell Thursday, Dell reported record revenue and operating profit in its fiscal fourth quarter, meeting analysts' estimates. The stock climbed 3% in after-market trading.
In corporate earnings news Thursday, American International Group Inc. (AIG
), the world's largest insurer, lost $103.8 million in the fourth quarter after setting aside $3.2 billion to boost reserves needed to pay claims. But the company raised its earnings guidance. The stock climbed 3.3% Thursday.
) posted disappointing same-store sales. On a brighter note, toy maker Hasbro (HAS
) says it beat earnings estimates. McDonald's fell 1.6% to $13.60 and Hasbro soared 4.5%.
Office Depot (ODP
) posted 20 cents vs. 13 cents fourth quarter earnings per share on 2% higher total company sales. The company is cautious about 2003, and now projects 2003 earnings of $1.03 to $1.08 a share, below analyst forecasts of $1.13. Office Depot declined 10% to $11.60.
Campbell Soup (CPB
) profits rose on higher sales and lower tax rates. The soup company fell 1% to $21 a share.
Meanwhile, General Motors (GM
) was under pressure on 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 Wednesday. The stock, at $33.59, fell 1.3%.
And Enron is back in the news. Enron from 1996-1999 evaded federal income taxes, the government now says in its investigation of the bankrupt energy company.
Treasuries moved higher in price Thursday as stocks sagged. Investors sought the relative safety of Treasuries amid mounting worries about the geopolitical scene and terrorism.
In other economic news Thursday, U.S. import prices rose 1.5% in January from a downwardly revised increase of 0.6% in December, while export prices rose 0.4% compared to an unchanged 0.2% drop in December. The jump in import prices will be duly shrugged off, notes MMS, after a largely anticipated 12.4% surge in petroleum prices on the month.
Looking ahead, Friday brings updates on December business inventories, industrial production for January and the University of Michigan consumer sentiment gauge.
European stocks ended lower. London's FTSE index was down 5.3 points, or 0.15%, to 3610.80, while Paris' CAC 40 index fell 11.97 points, or 0.43%, to 2758.65. In Frankfurt, the DAX index was down 15.98 points , or 0.62% to 2,555.27. London's Barclay's Bank reported higher earnings.
In Asia, stocks finished lower. On Thursday, the Nikkei 225 index fell 64.51 points, or 0.74%, to close at 8599.66. Hong Kong's benchmark Hang Seng declined 141.47 points, or 1.52%, to 9,173.43.
The U.S. and Britain, struggling to rally support for war, seized on a finding that Iraq has missiles of prohibited range as proof it is defying the U.N.: Reuters
The U.N. nuclear agency declared North Korea in violation of nuclear accords, sending the problem to the U.N. Security Council. In Congress, an intelligence chief told a panel North Korea may possess an untested missile capable of hitting the western U.S.: WSJ.
) hosts a developers' forum next week, which could have a significant impact on technology stocks.