- The Washington Times - Wednesday, March 10, 2004

NEW YORK (AP) — Stocks tumbled yesterday for the third straight session as investors, increasingly adopting a defensive strategy, bailed out of technology and other higher-risk shares. The Dow Jones Industrial average shed 160 points and other major indexes also dropped sharply.

Investors have been anticipating a temporary market pullback following a nearly year-long rally, but their recent eagerness to collect profits ahead of a significant decline may have helped fuel the correction.

“This is the third day in a row of some pretty heavy-duty rotation out of the cyclical stuff into the defensive stuff,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “It’s like a steamroller effect, with a little selling early on, then more and more as anticipation of a correction set in and people decided to lock in some of these profits.”

The Dow plunged 160.07, or 1.5 percent, to 10,296.89, its lowest close since Dec. 19. Since Friday, the Dow has dropped 298.66, or 2.8 percent, swinging to a loss for all of 2004 for the first time.

The broader gauges also fell considerably. On the fourth anniversary of the Nasdaq Composite Index’s all-time high of 5,048.62, the technology-heavy index sank 31.01, or 1.6 percent, to 1,964.15. That’s a loss of 83.48, or 4.1 percent, so far this week, and its lowest close since Dec. 22.

The Standard & Poor’s 500 Index lost 16.69, or 1.5 percent, to 1,123.89, its lowest finish since Jan. 13.

While most economists believe the recovery is on track, investors have found few bargains on Wall Street lately. Lackluster gains in the labor market and concerns over when the Federal Reserve will move to raise interest rates also have contributed to the market’s malaise.

Many traders were looking ahead to today and the government’s weekly report on unemployment claims, and congressional testimony by Federal Reserve Chairman Alan Greenspan before the House Education and the Workforce Committee.

“The market has definitely hit a point where it’s weighing valuations against the changing tide of monetary policy,” said Kevin Caron, market strategist with Ryan, Beck & Co. “We’re also looking at recent economic data that has been mixed and disappointing to some … and that’s why the market is stalling here.”

The major indexes reached their 2004 peaks three weeks ago, and have steadily declined since then. With no catalyst in sight to push stocks higher and forecasts for first-quarter earnings still ahead, investors may be scaling back their expectations.

“You get to a point where people feel like, ‘Well, I’m paying for future earnings,’” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “And if you get the sense that you’re not going to get the future earnings, or they’re not going to come as quickly as you’d hoped, then you stop buying … Why would you pay these prices anymore?”

With many investors wondering what’s next for the markets, emotions are running high, magnifying disappointments and muting good news.

Procter & Gamble’s upbeat announcement kept blue chips from suffering a steeper slide, but it wasn’t enough to rally investors. P&G;, the Dow’s most expensive stock, surged $3.04 to $105.53 after it raised its earnings forecast for the quarter and the year. The maker of Pampers diapers, Crest toothpaste and Mr. Clean also approved a 2-for-1 stock split and raised its annual dividend.

Meanwhile, Krispy Kreme Inc. lost $3.94, or 10 percent, to close at $34.22, after reporting earnings that matched expectations. Some on Wall Street said the doughnut maker, which opened 35 new stores during the quarter, would not be able to sustain the gains.

On the Nasdaq, Sun Microsystems Inc. gained 2 cents to finish at $4.35, rebounding from steep declines after downgrades from several brokerage firms. Analysts have questioned the long-term outlook for the computer-systems maker’s Unix business.

Decliners outnumbered advancing issues more than 3 to 1 on the New York Stock Exchange. Volume was light, with 1.65 billion shares traded, compared with 1.49 billion shares on Tuesday.

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