Stocks Cut Losses Despite Security Fears, Weak Sales Data

After plunging amid reports of a new anthrax case in New York, stocks managed to cut their losses in the last hour of trading in an overbought but resilient market.

The Dow Jones industrial average lost 66.43 points to close at 9,344.02 after plunging by as much as 200 points earlier. The technology-laced Nasdaq Composite Index gained 1.67 to end at 1,703.14 after spending most of the session in negative territory. The broad Standard & Poor's 500 Index lost 5.82 at 1,091.61. 

The market slid after NBC television said an employee of NBC news in New York has tested positive for anthrax, a bacteria whose spores are potentially deadly. The news spooked investors, even though the employee was diagnosed with a different strain of the disease that has afflicted three people in Florida.

Stocks had risen sharply over the past three weeks, with the broad market on Thursday finishing above where it closed Sept. 10. But on Friday, worries about sliding retail sales weighed and credit card issuer Providian Financial Corp. stunned Wall Street with its warning that earnings will fall much more than previously projected.

"News about an NBC employee testing positive for anthrax rolled the market over, because if there's a broader terrorist threat, it makes the battle against terrorism a lot closer to home than Afghanistan and it shakes consumer confidence a great deal," said Robert Cohen, head of trading at Credit Suisse First Boston.

Stocks took an early hit on news that the Producer Price Index rose 0.4 percent in September, above forecasts for an increase in inflation of only 0.1 percent.

Commerce Department data showed a 2.4 percent fall in U.S. September retail sales — lower than the forecast decline of 0.8 percent. Excluding auto sales, September retail sales fell 1.6 percent, more than the forecasted decline of 0.6 percent. 

Inflation on the wholesale level rose 0.4 percent in September, above the forecast increase of 0.1 percent. Excluding the volatile food and energy sectors of the economy, producer prices rose 0.3 percent, above a forecast increase of 0.1 percent. 

"You couldn't have asked for a couple of worse numbers this morning," said Ken Sheinberg, head of listed trading for SG Cowen Securities. "You've got an inflationary number and incredibly slowing retail sales, which shows consumer confidence after the attack just wasn't there."

But in a later report, the University of Michigan's preliminary October consumer sentiment index rose to 83.4 in October. Economists polled by Reuters had expected a drop to 76.1. Investors closely watch consumer confidence because a sharp drop could lead to weaker consumer spending.

Providian lost nearly 35 percent, or $7.04 to $13.31, after saying earnings will fall much more than previously projected, because of lower fee and finance charge revenue and higher credit losses in September.

Xerox Corp. fell 63 cents to $7.51, or 7.7 percent. The copier and printer giant expects a wider loss but is "cautiously" optimistic about the fourth-quarter. It cited currency losses and an insurance deductible related to the attacks on the United States.

Among other hot stocks, General Electric Co. which owns NBC, slipped $1.03 to $37.92 and was the fifth-most active stock on the NYSE.

Meanwhile, winners included technology companies that may be crucial in the event of a chemical or biological attack. Cepheid Inc. whose products help detect biological agents, soared 50 percent, or up $2.58 at $8.05 on the Nasdaq.

Technology stocks suffered a relapse, even as strong earnings from Juniper Networks and a jump in consumer confidence helped counter a dim outlook.

Juniper held on to gains, rising $3.45 to $20.09 after the networking equipment maker's results beat expectations even amid a slowdown in capital spending. Rival cisco Systems Inc. added 20 cents at $16.66.

Over the next two weeks, Wall Street will be pounded by thousands of announcements of corporate results. Analysts anticipate the reports will show profits fell by the highest percentage in a decade, according to market research firm Thomson Financial/First Call.

Declining issues led advancers more than 2 to 1 on the New York Stock Exchange. Volume came to 1.05 billion shares, compared with 1.34 billion at the same point Thursday.

The Russell 2000 index dropped 5.14 to 425.90. 

Overseas, Japan's Nikkei stock average rose 2.8 percent. In Europe, Germany's DAX index dropped nearly 0.2 percent, Britain's FT-SE 100 slipped 0.4 percent, and France's CAC-40 was up 1.4 percent.

Reuters and the Associated Press contributed to this report.