Stocks decline despite
strong economic data

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By Lisa Singhania
Associated Press

NEW YORK >> A stronger-than-anticipated economic report today failed to impress investors, who instead retreated into the now-familiar pattern of unloading technology stocks as they worried about the timing of a recovery.

The Nasdaq composite index tumbled to its lowest level in two months on concerns that Wall Street's advance last month might have been too much, too soon. Although economic data appears to be more positive, many businesses have yet to forecast a turnaround. Occasional bursts of bargain hunting have helped support the market, but there has been no catalyst for any broad movement.

The Dow Jones industrial average closed down 58.05 at 9,713.80, despite an earlier advance of 70.

The technology-focused Nasdaq fared even worse as its morning gains deteriorated. It lost 47.80 to 1,882.54 -- its lowest close since Nov. 21, when the index finished at 1.875.05.

The Standard & Poor's 500 index dropped 8.27 to 1,119.31.

Declining issues led advancers nearly 4 to 3 on the New York Stock Exchange, with 1,757 down, 1,365 up and 218 unchanged. Volume came to 1.30 billion shares, compared with 1.33 billion shares Friday. U.S. markets were closed yesterday for the Martin Luther King Jr. holiday.

The NYSE composite index fell 1.92 to 575.27, the American Stock Exchange composite index lost 7.24 to 823.40 and the Russell 2000 index dropped 4.93 to 469.44.

The Treasury's 2-year note fell 232 to 100 2032; its yield rose 4 basis points to 2.92 percent. The 10-year note fell 332 to 100 2332; its yield gained 1 basis point to 4.90 percent. The 30-year bond lost 1 032 to 99 2932; its yield gained 2 basis points to 5.38 percent.

"It's a little bit disappointing. You had some decent news and the market rose initially, but it wasn't able to stay up," said Robert Harrington, head of listed block trading at UBS Warburg. "People are expecting an economic rebound but I don't think the valuations and fundamentals are there yet. As a result the market has adopted a 'Prove it to me' attitude."

The selloff today came despite a report from the Conference Board that its Index of Leading Economic indicators, a key forecasting gauge, rose a strong 1.2 percent in December, the third consecutive monthly gain and a possible signal that the economy could be nearing a rebound.

The December gain was the largest since February 1996 and followed a revised increase of 0.8 percent in November and 0.1 percent in October.

"We continue to get signs from external sources, such as unemployment figures and leading indicators, that the economy is going to improve. But what we're not getting is the companies acknowledging that," said Bill Barker, investment strategy consultant at RBC Dain Rauscher. "That's what's keeping the market off balance."

Indeed, the market has fluctuated much of this year, after a strong advance during the last quarter of 2001 in a rebound from the post-terror attack selloff. In recent weeks, mixed forecasts from tech bellwethers including IBM and Intel intensified concerns that a recovery might be delayed -- and that the market might have risen too much, too quickly in its eagerness for a turnaround.

The Dow and Nasdaq have now each fallen more than 3 percent since the beginning of the year. The S&P is down 2.5 percent.

Earnings were again the focus of trading today, with Wall Street rewarding strong performances.

Amazon.com rose $2.44 or 24 percent, to $12.60 after reporting its first net profit ever. The figure beat its own forecasts and Wall Street's expectations for the online retailer's fiscal fourth quarter.

Lucent was also higher, gaining 19 cents to $6.88, on news of a smaller quarterly loss than Wall Street anticipated.

Lucent reported a slightly narrower loss for its first fiscal quarter, despite a sharp revenue drop as the company continues to cut jobs and sell businesses in an effort to get back in the black.

More than 7,000 additional jobs -- slightly more than previously announced -- will be cut by June, Chief Financial Officer Frank D'Amelio announced.

D'Amelio gave an upbeat outlook for the second quarter, saying revenue is expected to grow 10 percent to 15 percent and "our bottom line to improve at an even greater rate."

"We continue to believe that revenues in the first fiscal quarter of 2002 represented the low point for Lucent sales in the current market downturn," he said.

More than a year into a massive restructuring program, struggling Lucent posted a net loss of $423 million, or 14 cents per share for the quarter ended Dec. 31, compared with a loss of $464 million, or 14 cents per share in the year-ago quarter.

Excluding one-time items including the sale of its optical-fiber unit, the company lost $757 million, or 23 cents a share. That beat by a penny the forecast by analyst, which was cut by a penny after Lucent on Dec. 13 said its fiscal first-quarter loss would range between 23 cents and 26 cents.

Revenues for the first quarter totaled $3.58 billion, slightly more than the company had forecast last month, but down 18 percent from $4.35 billion in the first quarter of 2000.

Investors also bid pharmaceutical giant Merck up $1.29 to $59.29 on results that met previously lowered expectations and included a 5.5 percent increase in fourth-quarter profit.

The selling failed to ignite broader buying, however, particularly in the beleaguered tech sector. Semiconductor stocks fell back on worries about weakness in wireless communications. Texas Instruments slipped $1.65 to $25.89, while Intel lost $1.54 to $31.94.

Nokia, the world's largest cell phone maker, fell $1.35 to $21.15.

Also today, Kmart filed for bankruptcy, a move that had been anticipated. The nation's third-largest discount retailer had been struggling with weak sales and fierce competition for some time.

Kmart's stock plunged $1.05, or 60 percent, to 69 cents, while its chief competitor Wal-Mart gained $1.92 to $58.27.