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Stocks continue april decline hitting 2005 lows Original Source Link: (May no longer be active)
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U.S. Stocks Resume Decline; S&P 500, Dow Average Hit 2005 Lows
April 20 (Bloomberg) -- U.S. stocks resumed their 2005 drop as a government report showing inflation rose more than forecast sent the Dow Jones Industrial Average and Standard & Poor's 500 Index to this year's lows.
The report on March consumer prices overshadowed higher-than- expected earnings from companies including Intel Corp. and Caterpillar Inc. and heightened concern that the Federal Reserve will boost its pace of interest-rate increases.
``The consumer prices report is scaring people up a bit,'' said Tom Schrader, head of listed trading at Legg Mason Wood Walker Inc. in Baltimore. ``Sometimes you get the psychology during earnings season that this is as good as it's going to get. People are worrying that the Fed's moves are going to slow the economy.''
The Dow average lost 115.05, or 1.1 percent, to 10,012.36 and came within 1 point of falling below 10,000 for the first time since October. The decline was led by International Business Machines Corp., which dropped for a 14th straight day.
The S&P 500 fell 15.28, or 1.3 percent, to 1137.50, a level not seen since Nov. 2. The Nasdaq Composite Index lost 18.60, or 1 percent, to 1913.76.
The Dow, which rose for the first time in five days yesterday, has fallen 7.2 percent this year, while the S&P 500 has declined 6.1 percent. The Nasdaq has dropped 12 percent and sits within 6 points of its 2005 low.
More than five stocks decreased for every one that rose on the New York Stock Exchange today. Some 1.8 billion shares changed hands on the Big Board, 11 percent more than the same time a week ago.
Consumer Prices
Consumer prices gained 0.6 percent in March, the biggest increase since October, led by gasoline, airfares, clothing and medical care, the Labor Department said. Core prices, which exclude food and energy, rose 0.4 percent, more than the 0.2 percent economists expected in Bloomberg News poll.
Benchmark indexes extended their declines in the second half of trading after a survey by the Federal Reserve showed higher energy costs may be damping consumer demand.
Separately, Federal Reserve Board Vice Chairman Roger Ferguson Jr. said at the Economics Club of the University of North Carolina in Chapel Hill that the economy was in ``bit of a soft patch'' in March. Crude oil for June delivery rose 0.9 percent to $54.03 a barrel in New York.
Material Stocks
A gauge of raw material producers lost 1.9 percent, the second-steepest drop among the S&P 500's 10 industry groups as all 32 members declined.
U.S. Steel, the biggest steelmaker in the Americas, lost $1.02 to $45.68. DuPont Co., the second-largest U.S. chemical company, slipped 85 cents to $47.28. The stocks have declined 10 percent and 7.7 percent respectively this month.
IBM, which last week said first-quarter profit will miss estimates, slipped $3.33 to $72.15. The world's largest computer- services company is headed for its 14th straight decline, the longest streak in at least 25 years. The shares have fallen 20 percent this month.
The S&P 500 last week dropped to its lowest since November 2004 as reports on manufacturing, business inventories and retail sales signaled that economic growth is slowing.
Growth may slow further as the Fed continues to raise interest rates. All but one of the 81 economists in a Bloomberg survey predict the central bank will boost its benchmark rate by a quarter-point to 3 percent at its next meeting on May 3.
`Avoiding the Market'
Robert Loest, who helps manage $100 million at IPS Advisory Inc. expects the Fed to raise its benchmark interest rate to between 3.25 percent and 3.75 percent this year.
``Right now we're avoiding the market,'' Loest said in an interview from his office in Knoxville, Tennessee. ``We have a long way to go down.'' He declined to give a specific forecast.
Since June, the Fed has lifted its benchmark rate by a quarter-point seven times to 2.75 percent and has indicated that any future increase in rates will be done at a ``measured pace.''
Higher interest rates may curb loan demand and reduces the value of bonds by banks, brokers and insurers. Bank of America, the third-largest U.S. bank, fell 70 cents to $44.23.
Better-than-expected earnings from Intel and Yahoo! Inc. helped push some computer-related shares higher.
Intel pared a gain of as much as 3.6 percent to finish up 3 cents to $22.66. Net income was 34 cents a share on sales of $9.43 billion, beating analysts' average estimates of 31 cents and $9.3 billion, according to Thomson.
Shares of Yahoo! Inc., the owner of the world's second- biggest Internet search engine, gained $1.43 to $34.65. Net income rose to 14 cents a share, topping the average analyst estimate of 11 cents in a Thomson survey.
Google Inc., the most-used Internet search engine, added $6.70 to $198.10.
Caterpillar Jumps
Caterpillar jumped $3.09, or 3.6 percent, to $88.04 for the best performance in the Dow average. The world's largest maker of earthmoving equipment said first-quarter profit climbed to $1.63 a share, topping the $1.34 estimate in Thomson poll. The company cited higher prices and increased demand for mining trucks and construction machinery.
This week and next are the busiest for earnings reports, with about 300 S&P 500 companies presenting their results, according to Thomson.
About 63 percent of the 136 S&P 500 companies that reported quarterly results through this morning topped analysts' estimates, according to a Bloomberg analysis of data from Thomson. S&P 500 earnings are expected to rise 10.6 percent in the first period, Bloomberg data shows.
Avaya Inc., the No. 1 U.S. maker of office-telephone equipment, retreated $2.68, or 25 percent, to $8.01 for the steepest loss in the S&P 500. The company said profit this year won't meet its forecasts.
Ambac Financial Group Inc., the second-biggest U.S. bond insurer, slumped $12.41 to $62.20. The company lowered its 2005 earnings forecast, citing increased competition. Its 17 percent drop was the second-biggest in the S&P 500.
Last Updated: April 20, 2005 16:35 EDT
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