Stocks Tumble on Shaky News
NEW YORK – Stocks tumbled Monday as fret spread about the latest developments in the Middle East, aftershocks from the collapse of Enron, and mixed economic data that showed recovery is still a ways off.
The Dow Jones Industrial average ended down 87.60 points, or 0.89 percent, to end at 9,763.96. The technology-laced Nasdaq Composite Index was down 25.68 points, or 1.33 percent, to close at 1,904.90, while the broader Standard & Poor's 500 Index slid 9.55 points, or 0.84 percent, to end at 1,129.90.
The latest economic data from the government showed personal spending rose by an all-time high of 2.9 percent in October, led by a record increase in purchases of autos and other durable goods.
The flip side to that data was that personal incomes, reflecting the huge number of layoffs in the wake of the Sept. 11 terrorist attacks, showed no increase in October for the second straight month, the worst showing in more than seven years.
Investors also had to stomach news that the nation's manufacturing sector contracted in November for the 16th straight month, though the rate of decline slowed.
The Tempe, Ariz.-based National Association of Purchasing Management said Monday that its index of business activity rose to 44.5 in November from 39.8 in October. Analysts had been expecting a reading of 39.0.
In more economic news, construction spending increased 1.9 percent in October, the first monthly gain since April.
Investors were also still worrying over energy giant Enron's woes. Enron rebounded 13 cents to 39 cents. but still traded well under a dollar, a far cry from its year-high of almost $85. Enron dragged on utilities and leading Wall Street firms, including Citigroup Inc. and J.P. Morgan Chase & Co., on fears of possible losses in dealing with the once might energy trader.
Enron filed for the Chapter 11 bankruptcy on Sunday and hit rival and one-time suitor Dynegy Inc. with a $10 billion lawsuit for pulling out of a last-ditch rescue merger. Dynegy followed with countersuit. Dynegy fell $3.18, or 10.5 percent, to $27.17.
Citigroup fell $1.32 to $46.58 and J.P. Morgan dropped $1.46 to $36.26, dragging on the blue-chip Dow amid uncertainty surrounding their credit exposure to Enron. The banks made unsecured loans to Enron worth hundreds of millions of dollars.
On the world stage, heightened tensions in the Middle East as the bloody conflict between Israelis and Palestinians escalated over the weekend and Argentina's deepening economic woes also put investors on edge, analysts said.
Israeli helicopter gunships fired at least 10 missiles near Yasser Arafat's headquarters in Gaza City Monday, in retaliation for weekend suicide bombings by Islamic militants that claimed more than two dozen lives and wounded nearly 200 Israelis.
Arafat was not at the complex at the time of the attack; the Palestinian Authority leader was in the Gaza Strip city of Ramallah.
The violence there, along with optimism that Russia will comply with calls from the Organization of Petroleum Exporting Countries, sent oil prices soaring.
Crude oil prices surged on the violence and optimism about output cuts. Oil's strength put a shine on stocks like Exxon Mobil Corp. but heightened fears that rising energy prices could hinder a U.S. economic comeback. Exxon rose 26 cents, or 0.7 percent, to $37.66.
Argentina's continuing financial crisis also contributed to Wall Street's jitters, helping overshadow a batch of better-than-expected economic data, including a report that U.S. manufacturing activity fell at a slower pace last month.
Automakers, which indicated business remains difficult, were among Monday's losers. Ford fell $1.15 to $17.79 amid reports it of a cost-cutting plan later in the week and of a warning of a bigger-than-expected fourth-quarter loss. By late afternoon, Ford issued a statement saying it is cutting retirement and health benefits for 45,000 white-collar workers and laying off 630 people.
But Ford did not confirm that it will report a loss of 35 cents a share, bigger than the 10-cent loss analysts were expecting, in the year's final three months as reported Sunday by The Detroit News.
General Motors declined 59 cents to $49.11 after saying November car sales fell about 10 percent, and that it doesn't see an economic recovery until late 2002. On a positive note, GM said truck sales rose more than 36 percent in November.
Tech losers included software maker Oracle, which slipped 33 cents to $13.70 after Merrill Lynch lowered its earnings and revenue estimates for fiscal year 2002 and the fiscal second quarter. The brokerage cited a challenging environment for software spending.
Losses were otherwise widespread and were mostly attributable to profit taking. IBM fell $1.39 to $114.20, General Electric tumbled $1.53 to $36.97 and Citigroup declined $1.04 to $46.86.
Declining issues outnumbered advancers about 3 to 2 on the New York Stock Exchange. Consolidated volume was 1.52 billion shares, compared with Friday's 1.80 billion shares.
The Russell 2000 index, which tracks smaller company stocks, fell 3.75, or 0.8 percent, to 457.03.
Overseas, investors bid stocks lower Monday. Japan's Nikkei stock average finished down 3.1 percent. In Europe, France's CAC-40 fell 0.3 percent, Britain's FT-SE 100 declined 0.8 percent and Germany's DAX index finished down 0.03 percent.
Reuters and the Associated Press contributed to this report.