- The Washington Times - Saturday, January 18, 2003

NEW YORK (AP) Wall Street slid to its first weekly loss in 2003 yesterday as sluggish outlooks from Microsoft and IBM fed investor pessimism about the economy and sent stocks lower.
A trio of disappointing economic reports also weighed on stocks.
The U.S. trade deficit grew to a record $40.1 billion in November, reflecting Americans' ravenous appetite for foreign-made goods, especially toys, TVs and clothes. Analysts were predicting a $36.4 billion imbalance.
Meanwhile, the University of Michigan's midmonth report on consumer sentiment for January fell to 83.7 from 86.7 in December. The confidence reading fell short of economists' expectations of 86.4.
And the Federal Reserve reported that production in the nation's industrial sector unexpectedly dipped by 0.2 percent in December, more than erasing a 0.1 percent gain the previous month. Analysts had forecast a 0.2 percent increase.
The tech-focused Nasdaq Composite Index suffered its biggest loss in more than five weeks, and the three main gauges fell to their lowest levels since Dec. 31, before investors started picking up stocks on hopes of better market prospects for the new year.
"The news today coming from two key bellwethers is taking away some of the recent enthusiasm," said Steven Goldman, chief market strategist at Weeden.
The Dow Jones Industrial Average declined 111.13, or 1.3 percent, to close at 8,586.74, for a three-day loss of nearly 256 points.
The broader market also finished sharply lower. The Nasdaq dropped 47.56, or 3.3 percent, to 1,376.19, the largest decline since Dec. 9, when it fell 55 points. The Standard & Poor's 500 Index fell 12.82, or 1.4 percent, to 901.78.
For the week, the three gauges snapped a two-week winning streak, with the Dow losing 2.3 percent, the Nasdaq declining 4.9 percent, and the S&P; 500 falling 2.8 percent.
IBM fell $4.75 to $81.30 after reporting a drop in fourth-quarter profits that nonetheless beat analysts' estimates. However, it also issued a cautious outlook for 2003.
Microsoft dropped $3.89 to $51.46 after saying it would issue its first dividend and reported profits that slightly beat Wall Street's expectations. The company also announced plans for a two-for-one stock split but said it didn't show signs of improving demand.
"The trend so far is that most of the companies are beating expectations for the fourth quarter but are talking rather pessimistically for the rest of the year," said Stephen Massocca, president of Pacific Growth Equities.
Analysts attributed the retreat largely to premature optimism about earnings and President Bush's proposal to cut taxes by $674 billion over 10 years, a plan that may turn out to be quite different if it's passed by Congress.
"Earlier in the year, we had a rally based on the feeling that companies will come in better than expected. That did happen, but the problem is that it may not continue," Mr. Massocca said.
The mixed earnings news as well as concerns about a war with Iraq have left many investors uncertain, leading to cautious and choppy trading.
Yesterday, Iraqi President Saddam Hussein called on his people to rise up and defend the nation against any U.S.-led attack and promised that Iraq's enemies would face "suicide" at the gates of his capital.
"Until we start the war, the market will probably be in this limiting capped market, and hopefully once we get a clearer picture of the recovery's strength, stock prices should be poised to move higher afterwards," Mr. Goldman said.
General Electric lost 15 cents to $24.88 after the company reported reduced earnings in line with analysts' estimates.
AOL Time Warner fell 49 cents to $14.81 after its board selected Chief Executive Dick Parsons to be its new chairman as well, replacing AOL co-founder Steve Case, who announced last week that he was stepping down as chairman.
Advanced Micro Devices slid $1.17 to $6.03 after the chip maker had a fourth-quarter loss that missed expectations.
Declining issues outnumbered advancers about 5 to 2 on the New York Stock Exchange. Volume was light at 1.33 billion shares, compared with 1.68 billion traded Thursday.
The Russell 2000 index, a barometer of smaller-company stocks, fell 6.78, or 1.7 percent, to 388.10.


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