Pakistan killing upsets markets
NEW YORK » Wall Street skidded yesterday after the assassination of Pakistani opposition leader Benazir Bhutto and after the Commerce Department's durable goods orders exacerbated concerns about the U.S. economy.
Bhutto's assassination raised the possibility of increasing political unrest abroad, always an unsettling prospect for investors who have already been contending with domestic economic concerns for months. Oil prices rose following the news, and that unwelcome inflationary trend only added to Wall Street's uneasiness.
Meanwhile, the government said orders for durable goods -- big-ticket items from commercial jetliners to home appliances -- rose by just 0.1 percent last month. Economists had been looking for a rise of 2.2 percent. Still, November saw the first rise in durable goods orders in the last four months.
The Labor Department said the number of workers seeking unemployment benefits showed a surprise increase last week. Applications filed for unemployment insurance rose by a seasonally adjusted 1,000 to 349,000. Economists had expecting the figure would fall to around 340,000 for last week.
In a bright spot, the Conference Board said its Consumer Confidence Index advanced to 88.6 in December from a revised 87.8 in November. It was the first increase since July and Wall Street had expected a slight drop.
Investors track the employment and consumer confidence figures because consumer spending is about two-thirds of economic activity in the U.S.
"The data came in a bit softer than people were anticipating and then you throw in the situation in Pakistan and that's led people to rush back into Treasurys," said Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles.
Yesterday's drop was perhaps exaggerated by the fact that many traders were on vacation, making volume light and price swings more severe. Still, given the political uncertainty overseas, many investors were likely selling because they were uneasy about holding long positions before a holiday weekend.
The Dow fell 192.08, or 1.42 percent, to 13,359.61.
Broader stock indicators also fell. The Standard & Poor's 500 index declined 21.39, or 1.43 percent, to 1,476.27, and the Nasdaq composite index fell 47.62, or 1.75 percent, to 2,676.79. The Russell 2000 index of smaller companies fell 23.52, or 2.95 percent, to 773.51.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to a light 984.4 million shares.
Bond prices rose sharply as investors worried about political instability sought the safety of U.S.-backed investments. The yield on the 10-year Treasury note, which moves opposite its price, fell to 4.19 percent from 4.29 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 65 cents to settle at $96.62 per barrel on the New York Mercantile Exchange following Bhutto's death. Prices also lifted after the Energy Department reported that oil inventories fell by 3.3 million barrels last week, more than double what was expected.