Stocks Sag Amid Heightened Global Tensions

Published December 27, 2002

| Reuters

Stocks fell Friday, with the Dow plunging to a two-month low, as growing U.S. tensions with Iraq and North Korea sobered Wall Street's mood amid nagging concerns about mediocre corporate profits and stubbornly high oil prices.

The Dow Jones industrial average ended down 128.83 points, or 1.53 percent, at 8,303.78, while the broader Standard & Poor's 500 Index sagged 14.26 points, or 1.6 percent, to close at 875.40. The technology-laced Nasdaq Composite Index closed down 19.58 points, or 1.43 percent, at 1,348.31.

The Dow closed lower for the fourth straight session. Friday marked the third losing session in a row for the Nasdaq and S&P 500 Index.

For the week, the Dow fell 2.4 percent and the Standard & Poor's 500 fell 1.35 percent. The Nasdaq ended the week off 0.34 percent.

North Korea said on Friday it was expelling U.N. inspectors monitoring a reactor that could turn out plutonium for atomic bombs, prompting fresh U.S. demands for the secretive communist state to scrap its renewed pursuit of a nuclear arsenal.

"We have enough to deal with, with terrorism and Iraq. North Korea brings us one step further from global stability, said Peter Boockvar, equity strategist at Miller Tabak & Co. "It's one reason why people don't want to venture into stocks."

Stocks fell across the board, with only one stock -- AT&T Corp. (T) -- rising among the 30-share Dow Jones industrial average. Among decliners, Exxon Mobil Corp. (XOM) fell 68 cents to $34.64, even on a day when world oil prices touched fresh two-year highs.

The news from North Korea, which sparked fears of arms proliferation and the possibility of a showdown with the United States, came on top of nagging worries about a potential U.S. military action against Iraq.

"The macro situation with Iraq and North Korea is just overwhelming any rational thought. It's hard to make predictions when you have these gigantic fears out there," Boockvar said.

Short-dated Treasury yields touched record lows as rising global tensions drove investors to the safety of U.S. government debt.

With the flow of economic and corporate news at a trickle and many trading floors scantily staffed after Wednesday's Christmas Day holiday, low trading volumes exaggerated market moves, traders said.

"There's not a lot of selling pressure on very light volume," said Tim Smalls, managing director at S.G. Cowen. "But the North Korea situation raises another caution flag, so people are more apt to delay new purchases rather than sell new stocks."

Another issue weighing on markets was the rising cost of oil, raising fears that high fuel costs could crimp the U.S. economy's recovery.

NYMEX crude oil futures rallied to end higher on Friday, with a late surge pushing prices to fresh two-year highs. NYMEX February crude settled 23 cents higher at $32.72 a barrel, trading $32.05 to $32.76.

Oil-related shares ticked lower in line with crude prices, pushing the American Stock Exchange's oil index giving up 1.7 percent. Oil giant Exxon Mobil (XOM) ended down 68 cents, or 1.9 percent, at $34.64.

Lingering worries about the retailing sector slammed shares of Amazon.com Inc. (AMZN) for a second day in a row. Amazon shares fell amid worries the holiday shopping season could rank as the weakest in 30 years for major retailers. Amazon's shares sank $1.44, or 7.1 percent, to $18.86.

AT&T (T) shares rose 13 cents to $27.75. The telecommunications company plans to raise some long-distance rates next year and boost monthly fees.

Accounting issues were again in the spotlight after The Wall Street Journal reported that newly discovered e-mails from Tyco International Ltd. (TYC)'s former outside law firm reveal they knew about many of the firm's problems in early 2000. Tyco's shares, the third most actively traded on the NYSE, ended down 61 cents, or 3.9 percent, at $15.17.

One bright spot was Lockheed Martin (LMT), which won a $3.5 billion deal to sell jets to Poland. Lockheed rose 80 cents, or 1.4 percent, to end at $57.70.

The market had quickly shrugged off a report indicating the housing sector remains robust. The government reported that new home sales surged 5.7 percent to a new record in November, which defied predictions the sector was running out of steam.

On the New York Stock Exchange, where 758 million shares changed hands, declining stocks outnumbered advancers by a ratio of about 2 to 1. On the Nasdaq, where volume totaled roughly 805 million, the ratio of decliners to gainers was also about 2 to 1.

The Russell 2000 index, which tracks smaller company stocks, closed down 5.24 at 384.16.

Overseas, Japan's Nikkei stock average finished Friday up 0.2 percent. In Europe, France's CAC-40 lost 2.3 percent, Britain's FTSE 100 declined 2.9 percent and Germany's DAX index fell 5.4 percent.

Reuters and the Associated Press contributed to this report.

URL

http://www.foxnews.com/story/2002/12/27/stocks-sag-amid-heightened-global-tensions