- The Washington Times - Tuesday, December 7, 2004

NEW YORK (AP) — Stocks slumped yesterday as investors sifted through mixed economic data and rumors about big merger deals, including a report that consumer products giant Johnson & Johnson is in talks to purchase a leading medical device maker.

Analysts said the lackluster trading was characteristic of the first part of December, when a lull often precedes an end-of-year rally. But there is no guarantee the market will benefit from the so-called Santa Claus effect this year, as stocks already have posted a significant advance in the past two months and appear somewhat overextended.

Wall Street “needs something to boost things along,” said Larry Wachtel, market analyst at Wachovia Securities. “The probable deal … is helpful … but there’s nothing in the way of dramatic elements to drive you forward. I don’t see a lot of selling pressure. I don’t see a reason for the market to dump. But I just don’t see anything to drive it dramatically forward.”

The Dow Jones Industrial Average slid 106.48, or 1.01 percent, to 10,440.58.

The broader gauges also skidded lower. The Standard & Poor’s 500 index shed 13.18, or 1.11 percent, to 1,177.07. The Nasdaq Composite Index was down 36.59, or 1.70 percent, at 2,114.66.

Oil prices sank to a four-month low despite supply fears prompted by an attack on a U.S. Consulate in Saudi Arabia and unrest in Nigeria. Futures of light, sweet crude declined $1.52 to close at $41.46 per barrel on the New York Mercantile Exchange. Meanwhile, the dollar struck a new low against the euro.

Traders weren’t overly concerned by the slide in equities, predicting that if oil continues to decline, buyers will return to Wall Street. In addition, with many professional investors such as mutual fund managers logging gains for the year, there is less threat of a more significant sell-off.

“I am not too concerned right now. I think the character of the market is in place, at least until the end of the year,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “I think there’s more of a risk to be out of the market than in the market at this point. And I think it’s going to go higher.”

The government reported that worker productivity grew at a 1.8 percent annual rate in the third quarter, the slowest pace in nearly two years. Some saw the deceleration as a sign that employers have squeezed as many efficiencies out of their workers as they can, and finally might increase hiring to meet customer demand.

The Labor Department’s latest snapshot of productivity — the amount an employee produces for every hour of work — was lower than previously thought and marked a sharp pullback from the 3.9 percent pace logged in the second quarter.

Johnson & Johnson sagged $1.42, or 2.3 percent, to $60.41, on reports the drug and health care products company is in advanced talks to buy Guidant Corp., a leading maker of devices to treat heart and circulatory illnesses. The New York Times, citing executives close to the negotiations, said the proposed deal was valued at more than $24 billion. Guidant surged $3.60, or 5.2 percent, to $72.35, on the news.

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