Stocks Slump on Iraq War Worries

NEW YORK – Wall Street slumped Friday after a weak U.S. consumer confidence report added to investors' concerns that a long Iraq war may dent the economy and corporate profits.

The blue-chip Dow Jones industrial average closed down 55.68 points, or 0.68 percent, at 8,145.77, after slipping to a session low of 8,105.79. The broad Standard and Poor's 500 fell 5.04 points, or 0.58 percent, at 863.48. The tech-laced Nasdaq Composite lost 14.63 points, or 1.06 percent, to 1,369.62.

For the week, the Dow fell 4.4 percent, Nasdaq 3.6 percent and S&P 3.6 percent. With this week's declines, the Dow and the S&P are off about 2 percent for the year while the Nasdaq is up 2.5 percent.

All three major stock gauges ended lower for the week, snapping two weeks of gains that had pushed indexes into the black for the year.

"There's not much to move this market if people are expecting to have disappointing earnings in the first quarter," said James Volk, managing director of equity trading at D.A. Davidson and Co. in Portland, Oregon.

"Outside the geopolitical environment, what the market is bracing for is the next corporate earnings season," said Joe Kalinowski, chief investment officer at Ehrenkrantz King Nussbaum Inc.

"I track the rate of change of corporate earnings pre-announcements, and what's disturbing is that for every positive change, there's been three negative ones," he said, referring to announcements companies make just before they release their quarterly results.

Stocks attempted to rally during the session amid bouts of buying from investors foreseeing the Iraq conflict would end with a U.S. victory, analysts said. But in the climate of uncertainty caused by the war, investors are loath to snap up stocks before the weekend when developments can change.

Kalinowski said as U.S. troops approach Baghdad, the images of war could be gruesome and further sap investor confidence.

"I anticipate a weaker market if we see more gruesome images," he said. "I could argue that the market is undervalued, but sentiment is terrible right now and that's what is driving the market."

Playing on U.S. and British fears of being sucked into bloody street battles, especially in a capital heavily defended by elite Republican Guards, Iraq swore to fight on and promised "living hell" for the invaders. The United States blasted communications centers in Baghdad Friday in some of the heaviest air strikes of the war, and advancing U.S. ground troops appeared to pause to regroup and strengthen supply lines.

The University of Michigan's gauge of consumer sentiment fell in March to its lowest in almost a decade. Weak sentiment bodes poorly for corporate profits, as consumer spending accounts for about two-thirds of activity in the U.S. economy.

Earlier, investors reacted little to data that showed U.S. consumer spending was unchanged in February as incomes posted a solid advance. The report defied forecasts for a spending drop.

"There's not much to move this market if people are expecting to have disappointing earnings in the first quarter," said James Volk, managing director of equity trading at D.A. Davidson and Co. in Portland, Oregon.

Shares of ConAgra Foods Inc. (CAG) and Sara Lee Corp. (SLE) fell Friday after a newspaper report said the two companies were involved in the accounting scandal that engulfed Dutch grocer Ahold NV and its U.S. Foodservice Unit.

Citing a person familiar with the situation, The Wall Street Journal said the food companies colluded with executives of U.S. Foodservice to inflate supplier rebates.

Sara Lee denied it had acted inappropriately, and ConAgra said it had followed ordinary and appropriate business practices in its relationship with U.S. Foodservice.

Shares of Sara Lee fell 5.9 percent, or $1.17, to $18.69 on the New York Stock Exchange and ranked among the Big Board's most active issues.

ConAgra fell as much as 16.9 percent to a two-year low of $17.86 before paring losses to close at $19.65, off 8.5 percent, or $1.83. ConAgra was the NYSE's third-most active issue.

ImClone Systems Inc. (IMCL) shares rose 5.6 percent to $18.36 after Germany's Merck KGaA said an independent panel had confirmed positive assessment of a trial of ImClone's experimental cancer drug, Erbitux.

Newmont Mining Corp. (NEM), the world's largest gold miner, reported a fourfold rise in fourth-quarter earnings on higher gold sales and prices, boosting its shares 8.2 percent. Newmont added $2.03 to $26.59.

Lifecore Biomedical Inc. (LCBM) sank $2.54, or almost 42 percent, to $3.55. The medical product maker has said it has voluntarily suspended global sales of Intergel, its product for reducing internal scarring from gynecological surgery, which is marketed by Johnson & Johnson's Gynecare unit.

Among big movers in the stock market, Fleming Cos. (FLM) lost 49 cents, or 43 percent, to 65 cents. The groceries distributor, reeling from the loss of its biggest contract and facing an accounting investigation, said on Friday it will delay filing its 2002 financial statements and its survival may be in doubt if it can't get more money soon.

Manugistics Group Inc. (MANU) lost 34 cents, or 12.5 percent, to $2.39. Manugistics late on Thursday after the close said its net loss swelled in the fiscal fourth quarter from a year earlier as the business software maker wrote down assets and sales weakened amid slow demand.

Advancing stocks beat decliners by a narrow margin of about 6 to 5 on the New York Stock Exchange, while on Nasdaq, decliners edged out advancers by a ratio of 8 to 7. About 1.21 billion shares traded on the Big Board, one of the year's lightest sessions, and about 1.32 billion on the Nasdaq.

The Russell 2000 index, which tracks smaller company stocks, fell 0.81, or 0.2 percent, to 368.69.

Overseas, Japan's Nikkei stock average finished Friday down 1.1 percent. In Europe, France's CAC-40 rose 0.4 percent, Britain's FTSE 100 lost 0.6 percent and Germany's DAX index dropped 2.5 percent.

Reuters and the Associated Press contributed to this report.