Published December 09, 2002
NEW YORK – Stocks descended to close lower Monday as the massive bankruptcy of No. 2 U.S. carrier United and the downgrade of IBM weighed on investors.
The Dow Jones Industrial average ended down 172.36 points, or 2.03 percent, to close at 8473.41. The Nasdaq Composite index was down 55.30 points, or 4.04 percent, at 1367.14, while the broader Standard & Poor's 500 index was down 20.23 points, or 2.26 percent, at 892.
Fears about a possible attack on Iraq also weighed as U.S. officials began poring over Iraq's 12,000-page weapons declaration. Iraq says it has no weapons of mass destruction, though U.S. officials say they have evidence of nuclear, biological and chemical programs.
"There's no good news," said David Memmott, head of listed block trading for Morgan Stanley. "The Iraq thing is no closer to being resolved — there's more uncertainty and no positive catalyst. Investors are in the 'prove-it-to-me mode' in terms of the economy and corporate earnings."
Stocks had rallied after hitting five-year lows Oct. 9, but investors now fret the market climbed too far, too fast. The blue-chip Dow Jones industrial average and the benchmark Standard & Poor's 500 index have fallen for six of the past seven sessions.
A surprisingly weak jobs report for November and a trickle of corporate profit warnings sent market gauges lower last week, snapping an eight-week streak of gains for the Dow average.
In a widely expected move, President Bush nominated John Snow, chairman of CSX Corp. (CSX), as treasury secretary to succeed Paul O'Neill, who, along with top White House economic adviser Lawrence Lindsey, abruptly resigned on Friday at the White House's request.
However, United Airlines proved to be the main focus of investors on Monday. An array of related stocks fell after United, slammed by high costs and low fares, filed for the largest bankruptcy ever in the global airline industry.
"The foundation of the U.S. economy is shaken by that UAL headline. It's going to have a ripple effect," said Steve Kolano, equity trader at Mellon Growth Advisors.
Bank One Corp. (ONE) lost 65 cents to $37.60 after the No. 6 U.S. bank said it would take a $45 million charge because of United's bankruptcy. The bank also said it has agreed to extend $600 million in financing to the air carrier.
Parent UAL (UAL) dipped earlier in the day but then clawed higher after United Airlines said it would cut pay for all officers and salaried and management employees as it aims to control costs while reorganizing under bankruptcy protection. UAL closed unchanged at 93 cents, but investors remain worried the bankruptcy could hurt other companies.
Dow industrial IBM (IBM) fell $2.78 to $79.54 after Banc of America cut the computer maker's brokerage rating to "market performer" from "buy." IBM was the Dow's largest declining issue.
Citigroup (C) dropped $1.41 to $36.15 and J.P. Morgan Chase (JPM) fell $1.18 to $23.25 on reports that congressional investigators were examining whether the two financial companies helped Enron hide debt or avoid taxes.
The U.S. banks also are part of a group of lenders providing bankrupt United Airlines with $1.5 billion in debtor-in-possession financing, possibly pressuring their stock prices, an analyst said.
Computer services company Electronic Data Systems Corp. (EDS) fell 57 cents to $16.32 after cutting its fourth-quarter earnings forecast by 10 percent, pinning the shortfall on aircraft lease agreements it struck with United.
Qualcomm (QCOM), the No. 1 maker of chips used in mobile phones, slumped $2.29 to $39.19. Salomon Smith Barney cut Qualcomm Inc. to "in-line" from "outperform," citing the 60 percent gain in its stock price since its recent lows in mid-September.
Nokia Corp. (NOK), the world's largest mobile phone maker, fell $1.32 to $18.02. Investors shrugged off an upgrade of the Finnish company by Salomon Smith Barney, shying away from taking big stakes before Nokia's earnings update on Tuesday.
Wal-Mart Stores Inc. (WMT), the world's biggest retailer, sagged $1.19 to $51.85. The Dow member said snow and ice hurt sales last week, but it still expects December sales growth at stores open at least a year to be within the 3 percent to 5 percent forecast range.
Declining issues outnumbered advancers 5 to 2 on the New York Stock Exchange. Volume was light.
The Russell 2000 index, a barometer of smaller company stocks, fell 10.43, or 2.6 percent, to 386.29.
Overseas, Japan's Nikkei stock average finished 0.4 percent lower Monday. In Europe, France's CAC-40 fell 2.2 percent, while Britain's FTSE 100 dropped 2 percent and Germany's DAX slid 4.4 percent.
Reuters and The Associated Press contributed to this report.