Analysts had been expecting a correction as the yearlong rally slowed, but the news from Spain has triggered a downturn.
By Associated Press
Published March 16, 2004
NEW YORK - The election of an antiwar government in Spain further unnerved the stock market Monday, propelling the Dow Jones Industrial Average more than 137 points lower on fears that terrorists, emboldened by the events in Spain, would strike again.
"The Spain elections certainly have some ramifications on the war on terror, and the political implications aren't great for the U.S.," said Jay Suskind, head trader at Ryan Beck & Co. "Put that together with the lousy week we had last week, and there's not much confidence in buying."
The past week's selloff brought an end to the market's yearlong rally, which had started to taper off in mid-February. Resumption of the rally is unlikely for some time, said Russ Koesterich, U.S. equity strategist for State Street Corp.
"There's been a big reduction in risk appetite over the past few months, and investors are becoming very critical," Koesterich said. "The market has discounted a lot of good news, and there's limited upside ahead. That doesn't mean you should get out of the market, but the easy money's behind us."
The Dow fell 137.19, or 1.3 percent, to 10,102.89. Broader stock indicators were also markedly lower. The Standard & Poor's 500 index was down 16.08, or 1.4 percent, at 1,104.49, and the Nasdaq composite index dropped 45.53, or 2.3 percent, to 1,939.20, its biggest drop since Feb. 4. The Dow and Nasdaq were at their lowest levels since mid-December, while the S&P 500 was at its lowest level since late December.
Monday's session marked the third time in four sessions that the Dow fell more than 100 points, a common occurence during the bear market but one that Wall Street has not been used to since stocks began their ascent a year ago. Since peaking at 10,737.70 on Feb. 17, the Dow has lost nearly 635 points, or nearly 6 percent.
While analysts had been expecting the market to go through some kind of correction, and prices were in the process of consolidating, the reawakening of terrorism fears has made it clear that Wall Street is in at least a temporary downturn.
Even positive economic news didn't help Monday. Industrial production rose by a better-than-expected 0.7 percent in February, a sign that manufacturers may finally regain ground after lagging in the overall economic recovery. Some economists had feared a drop-off after January's 0.8 percent rise.
Investors also held back on buying before today's Federal Reserve meeting, which was expected to give a clearer picture on whether interest rates would remain steady for the long term.
"If the Fed comes out with a really optimistic statement, that could help things," Suskind said. "But even that might not be enough. Long-term, things look pretty good, and we should get some good preannouncement on earnings. But short-term, there's a lot of concern out there."
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where consolidated volume came to 2.02-billion shares, compared to 1.76-billion on Friday.
The Russell 2000 index of smaller companies fell 15.89, or 2.7 percent, to 566.95.
Overseas, Japan's Nikkei stock average closed 1.4 percent higher. European markets fell sharply, however, on terrorism concerns. Britain's FTSE 100 closed 1.2 percent lower, France's CAC-40 finished down 2.4 percent and Germany's DAX index dropped 2.7 percent.
