NEW YORK >> A disappointing outlook from AOL Time Warner put investors on the defensive today, prompting them to question the strength of other big companies and bid stocks sharply lower. AOL outlook hurts stocks
By Amy Baldwin
Associated PressThe downturn, which extended a decline that began Friday, wasn't surprising given how far stock prices have come recently, with the Dow Jones industrials posting eight straight weekly wins and the broader market advancing for seven of the past eight weeks.
While investors are growing more confident about the economy and earnings, they are expected to cash in some profits, especially amid the uncertainty over whether there will be a war with Iraq.
"At these levels, the market is in pullback mode," said Gary Kaltbaum, market technician for Investors' Edge Partners in Orlando, Fla.
Declining issues outpaced advancers more than 4 to 3 on the New York Stock Exchange where trading volume was light.
The Dow closed down 119.64, or 1.4 percent, at 8,742.93. The Dow has lost 188.75 over the past three sessions.
The broader market was also lower. The Nasdaq composite index fell 35.82, or 2.4 percent, to 1,448.96. The Standard & Poor's 500 index declined 13.78, or 1.5 percent, to 920.75. The Russell 2000 index was down 7.70, or 1.9 percent, at 400.84.
The price of the Treasury's 10-year note was up 3/32 point this afternoon, while its yield fell to 4.22 percent from 4.23 percent yesterday. Two-year Treasury notes were up 1/16 point and yielded 2.04 percent, down from 2.07 percent yesterday.
Investors sold off AOL, down $2.36 at $14.21, after the company affirmed its 2002 earnings forecast for its America Online unit but warned of sinking advertising revenues for the year ahead.
Wall Street's losers also included companies due to issue earnings outlooks later in the week, a sign that investors were feeling skittish about the health of other big companies. Merck dropped $1.13 to $58.82 ahead of its 2003 forecast on Thursday. Intel fell 74 cents to $20.31 ahead of Thursday's mid-quarter update. Both are Dow industrials.
Investors also punished Ford, which fell $1.49 to $9.96 after posting a 21 percent drop in November auto sales.
Brokerage downgrades hurt other issues. Supermarket operator Albertson's fell $1.31, to $22.26 on a downgrade from J.P. Morgan, while Marriott International declined $1.22 to $34.47 on a downgrade from Deutsche Securities.
Because the market can't be expected to go up every day, analysts said the market's slippage -- moderate and on light volume -- was necessary.
"The market has gotten a little extended here without resolution to the Iraq conflict," said Jeff Kleintop, chief investment strategist for PNC Financial Services Group in Philadelphia. "We have gone beyond or at the threshold of where the market is comfortable going right now."
Overseas, Japan's Nikkei stock average finished up 0.3 percent. In Europe, France's CAC-40 fell 2.3 percent, Britain's FTSE 100 lost 1.9 percent and Germany's DAX dropped 3 percent.
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