20/06/2003 13:52
NEW YORK, June 19 (Reuters) - Stocks slumped on Thursday after a report said manufacturing in the Mid-Atlantic region had not picked up in June by as much as some investors had expected, tempering hopes for an imminent economic recovery.
Investors are beginning to question the sustainability of a rally, fueled by anticipation of an economic rebound, that has driven the Standard & Poor's 500 Index .SPX up more than 24 percent from its 2003 low hit in mid-March, analysts said.
"Investors are very worried about valuation," said Hugh Johnson, chief investment officer at First Albany Corp. "They are becoming more worried that we've come too far, too fast, and won't get strong enough growth in the economy and earnings in the second half of this year to support stocks at current levels."
The Federal Reserve Bank of Philadelphia said its index of factory business conditions rose to 4.0 in June from negative 4.8 in May -- marking the first month of growth since February and registering slightly above forecasts of 3.3.
A sharp gain in the neighboring New York Fed's factory survey earlier this week, however, had heightened speculation that the Philadelphia number might come in even higher.
The Dow Jones industrial average .DJI fell 114.27 points, or 1.23 percent, to 9,179.53, while the broader S&P 500 was down 11.16 points, or 1.1 percent, to 998.93. The technology-laced Nasdaq Composite Index .IXIC lost 28.55 points, or 1.7 percent, to 1,648.59.
General Electric Co. GE.N also dampened the mood after it said the volume of its short-cycle plastics orders for May dropped between 15 percent and 20 percent from last year, traders said.
The market's drop accelerated near the close, a move traders pinned on Friday's "quadruple-witching" -- the simultaneous expiration of stock index futures and options, equity options and single-stock futures -- which can exaggerate the market's moves.
The Conference Board said its index of leading indicators rose at a higher-than-expected pace in May. But a separate report from the government said weekly jobless claims -- though down for the second straight week -- remained stubbornly high.
The federal budget moved further into the red in May and, with four months left in the budget year, has pushed the budget gap into record territory, according to the U.S. Treasury.
MIXED MESSAGES
GE, buffeted by speculation the company could trim its own 2003 earnings estimates at an analyst meeting scheduled for Friday, dragged on the blue-chip Dow with a drop of 87 cents, or 3 percent, to $29.86.
Another active issue was Morgan Stanley MWD.N , which fell after two rival brokerages cut their ratings on the company. Both J.P. Morgan and UBS downgraded their recommendations on Morgan Stanley, the No. 2 U.S. investment bank, a day after it reported a 25 percent drop in quarterly earnings. Its shares fell $2.88, or 6 percent, to $44.01.
Investment bank Lehman Brothers Holdings Inc. LEH.N said its quarterly earnings rose 48 percent, as the firm's fixed-income business drove revenues to a record high. Its shares, however, sagged $2.97, or 4 percent, to $71.02, as banking stocks continued to pare recent gains.
Forest Laboratories Inc. FRX.N sank $7.32, or 12 percent, to $53.29 after it said a clinical trial of an experimental treatment did not significantly improve awareness and reasoning in patients with mild to moderate Alzheimer's disease.
Investors are beginning to question the sustainability of a rally, fueled by anticipation of an economic rebound, that has driven the Standard & Poor's 500 Index .SPX up more than 24 percent from its 2003 low hit in mid-March, analysts said.
"Investors are very worried about valuation," said Hugh Johnson, chief investment officer at First Albany Corp. "They are becoming more worried that we've come too far, too fast, and won't get strong enough growth in the economy and earnings in the second half of this year to support stocks at current levels."
The Federal Reserve Bank of Philadelphia said its index of factory business conditions rose to 4.0 in June from negative 4.8 in May -- marking the first month of growth since February and registering slightly above forecasts of 3.3.
A sharp gain in the neighboring New York Fed's factory survey earlier this week, however, had heightened speculation that the Philadelphia number might come in even higher.
The Dow Jones industrial average .DJI fell 114.27 points, or 1.23 percent, to 9,179.53, while the broader S&P 500 was down 11.16 points, or 1.1 percent, to 998.93. The technology-laced Nasdaq Composite Index .IXIC lost 28.55 points, or 1.7 percent, to 1,648.59.
General Electric Co. GE.N also dampened the mood after it said the volume of its short-cycle plastics orders for May dropped between 15 percent and 20 percent from last year, traders said.
The market's drop accelerated near the close, a move traders pinned on Friday's "quadruple-witching" -- the simultaneous expiration of stock index futures and options, equity options and single-stock futures -- which can exaggerate the market's moves.
The Conference Board said its index of leading indicators rose at a higher-than-expected pace in May. But a separate report from the government said weekly jobless claims -- though down for the second straight week -- remained stubbornly high.
The federal budget moved further into the red in May and, with four months left in the budget year, has pushed the budget gap into record territory, according to the U.S. Treasury.
MIXED MESSAGES
GE, buffeted by speculation the company could trim its own 2003 earnings estimates at an analyst meeting scheduled for Friday, dragged on the blue-chip Dow with a drop of 87 cents, or 3 percent, to $29.86.
Another active issue was Morgan Stanley MWD.N , which fell after two rival brokerages cut their ratings on the company. Both J.P. Morgan and UBS downgraded their recommendations on Morgan Stanley, the No. 2 U.S. investment bank, a day after it reported a 25 percent drop in quarterly earnings. Its shares fell $2.88, or 6 percent, to $44.01.
Investment bank Lehman Brothers Holdings Inc. LEH.N said its quarterly earnings rose 48 percent, as the firm's fixed-income business drove revenues to a record high. Its shares, however, sagged $2.97, or 4 percent, to $71.02, as banking stocks continued to pare recent gains.
Forest Laboratories Inc. FRX.N sank $7.32, or 12 percent, to $53.29 after it said a clinical trial of an experimental treatment did not significantly improve awareness and reasoning in patients with mild to moderate Alzheimer's disease.
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