Worries about terrorism,
economy pull stocks lower

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By Amy Baldwin
Associated Press

NEW YORK >> Disappointed by a report on the economy and uneasy following warnings of more terror attacks, investors cashed in profits today and sent stocks sharply lower.

Stocks were already expected to retreat somewhat after last week's big rally, during which the tech sector had its biggest weekly percentage gain in 13 months. But statements about terrorism by Vice President Dick Cheney and the FBI, as well as a disappointing Index of Leading Economic Indicators, prompted additional selling.

"The market was ripe for profit taking. We had a very good week last week, a very encouraging week. So traders probably jumped on the Cheney thing as a triggering event, another reason to sell. And the economic news, although (the economy) is healthy, it is not as robust as people would hope," said Bill Barker, investment strategy consultant at RBC Dain Rauscher in Dallas.

The Dow Jones industrial average closed down 123.58, or 1.2 percent at 10,229.50. But the Dow hung onto much of its advance from last week when it climbed 413.16, or 4.2 percent.

The broader market also pulled back. The Nasdaq composite index fell 39.80, or 2.3 percent, to 1,701.59, having on Friday claimed a five-session winning streak, its first since early October. The Nasdaq ended the week up 140.54, or 8.8 percent.

The Standard & Poor's 500 index dropped 14.71, or 1.3 percent, to 1,091.88, after rising 51.60, or 4.9 percent, last week. Declining issues outnumbered advancers more than 9 to 5 on the New York Stock Exchange, where volume was light.

The Russell 2000 index, which tracks smaller company stocks, fell 5.77, or 1.1 percent, to 503.17.

The price of the Treasury's 10-year note was up 7/16 point, while its yield fell to 5.19 percent from 5.26 percent late Friday. Two-year Treasury notes were up 1/8 point and yielded 3.29 percent, down from 3.37 percent late Friday.

The selling was intensified by fears of more terror attacks and economic news.

FBI Director Robert Mueller said today suicide bombers like those who have attacked stores, restaurants and other public places in Israel eventually will hit the United States. And Cheney told "Fox News Sunday" there have been hints of future terrorist attacks that must be taken seriously.

"The average investor is so sensitive right now. You get a little news like that, and all of a sudden they have a shorter-term outlook on the market," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif.

The Leading Economic Indicators reminded investors that the economic recovery remains slow and tentative. The Conference Board said the index, an important barometer of U.S. economic activity, fell 0.4 percent in April, after inching up 0.1 percent in March.

Overseas, Japan's Nikkei stock average finished Monday up 0.1 percent. In Europe, France's CAC-40 fell 1.0 percent, Britain's FTSE 100 slipped 0.2 percent, and Germany's DAX index lost 0.7 percent.