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Consumer stocks send investors fleeing


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POSTED: Thursday, February 05, 2009

NEW YORK » Wall Street is now worrying about the companies usually seen as safe havens.

After an early rally yesterday, investors succumbed to concerns about disappointing earnings and the market ended the day with a loss.

Falling consumer stocks weighed most heavily on the Dow Jones industrial average, which slid 122 points.

Meanwhile, the tech-focused Nasdaq composite index showed only a moderate retreat.

Fourth-quarter numbers from Kraft Foods Inc., Walt Disney Co. and Time Warner Inc. provided the latest reminder of the economy's struggles. The weaker-than-expected reports and a profit warning from Costco Wholesale Corp. left investors fearing that consumers are cutting back even more than most analysts thought.

The market had rallied early in the day after a better-than-expected reading on the service sector. The Institute for Supply Management said the sector shrank in January at a slower pace than in December. Still, it was the fourth straight month that business activity in services contracted.

The Dow fell 121.70, or 1.51 percent, to 7,956.66. The Standard & Poor's 500 index fell 6.28, or 0.75 percent, to 832.23, and the Nasdaq composite index fell 1.25, or 0.08 percent, to 1,515.05. The Russell 2000 index fell 4.42, or 0.98 percent, to 448.48.

The yield on the benchmark 10-year Treasury note rose to 2.93 percent from 2.88 percent late Tuesday. The yield on the three-month T-bill dipped to 0.30 percent from 0.32 percent.

The dollar was mixed against other major currencies. Gold prices rose.

Light, sweet crude fell 46 cents to settle at $40.32 a barrel on the New York Mercantile Exchange.

The latest corporate profit reports weighed on the market. Kraft posted a fourth-quarter profit drop of 72 percent and its stock fell $2.63, or 9.2 percent, to $26.11.

Disney said late Tuesday its fourth-quarter earnings fell 32 percent and its shares tumbled $1.62, or 7.9 percent, to $19. Time Warner reported a fourth-quarter loss of $16 billion after the conglomerate wrote down the value of its cable, publishing and AOL assets and shares fell 36 cents, or 3.7 percent, to $9.42.

Costco fell $3.14, or 6.8 percent, to $42.98 after reporting that its January sales fell and after the wholesale club chain warned that its second-quarter results would fall well short of Wall Street's expectations.