Stocks reverse; Dow drops 133
NEW YORK » Wall Street suffered a sharp reversal yesterday, with the Dow Jones industrials dropping 133 points as concerns over corporate profits and economic growth reasserted themselves.
Wednesday's rally, which sent the Dow up 128, proved short-lived as Pfizer Inc. withdrew its profit forecasts for next year and 2007, increasing investors' worries about the vulnerability of corporate profits. Intel Corp. spurred such jitters earlier this week in lowering its forecast for sales of its computer chips.
Members of the Federal Reserve's interest rate-setting committee also fed inflation concerns, leading investors to wonder whether a continued rise in interest rates would slow the economy too much and lead to more corporate profits shrinking.
The Dow fell 133.03, or 1.28 percent, to 10,281.10 after gaining 128 points on Wednesday.
Broader stock indicators also pulled back. The Standard & Poor's 500 index lost 17.96, or 1.5 percent, to 1,177.80, and the Nasdaq composite index dropped 23.13, or 1.11 percent, to 2,068.11.
Bonds lost ground, with the yield on the 10-year Treasury note rising to 4.48 percent from 4.44 percent late Wednesday. The dollar was lower against most major currencies, while gold prices also fell.
Oil prices fell sharply despite concerns about Hurricane Wilma, due to enter the Gulf of Mexico by the end of the week. A barrel of light crude settled at $61.03, down $1.38 on the New York Mercantile Exchange -- a sharp drop, but one that had little effect on stocks.
"Energy prices really have fallen to a distant second as far as concerns for the market," said Scott Wren, equity strategist for A.G. Edwards & Sons. "The big concern is whether the Federal Reserve is going to keep raising interest rates and, if they do, whether that's going to slow the economy too much."
The Conference Board said its index of leading indicators, which attempts to forecast future growth, fell 0.7 percent for September, worse than the 0.5 percent drop expected by economists. The index slipped 0.2 percent in August.
In earnings news, Pfizer said profits fell 52 percent in the third quarter due to acquisition costs. While the company beat Wall Street forecasts for earnings before items, revenues were below expectations. That, combined with the company's lowered forecasts, sent Pfizer shares tumbling $2.07, or 8.6 percent, to $21.90.