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Iraq, rate hike fears
drown out earnings
U.S. stocks fell as reports of increased fighting in Iraq and the prospect of higher interest rates overshadowed better-than-expected corporate profits. The Dow Jones Industrial Average and the Nasdaq Composite Index had their biggest declines since March. 15.
"We have had a little bit of a sloppy market because aside from the earnings picture, there are several other things going on: the interest rate picture, the international situation," said Michelle Clayman, who oversees $3 billion as chief investment officer at New Amsterdam Partners in New York.
Shares of producers of raw materials declined, including Alcoa Inc. and U.S. Steel Corp., on concern growth in China will slow and curb demand. The country's efforts to cool expansion in the steel, cement and other heavy industries are working, a Chinese central bank official said.
The Dow dropped 135.56, or 1.3 percent, to 10,342.60. The Nasdaq shed 42.99, or 2.1 percent, to 1,989.54, for its third straight decline. The Standard & Poor's 500 Index slid 15.70, or 1.4 percent, to 1,122.41. The benchmark has lost 3.1 percent since its 23-month high on Feb. 11.
Treasury's 10-year note closed down 2532 point, while its yield rose to 4.49 percent from 4.39 percent yesterday. Two-year Treasury notes fell 532 point and yielded 2.24 percent, up from 2.15 percent yesterday.
More than three stocks fell for every one that rose on the New York Stock Exchange. Some 1.86 billion shares changed hands on the Big Board, the most since March 11.
U.S. Marines are fighting insurgents near the main train station in Fallujah, Iraq, Brigadier General Mark Kimmitt said, following a battle last night in which U.S. aircraft attacked targets. In neighboring Syria, the United States and United Kingdom closed embassies following explosions and gunfire there yesterday.
"Right now the biggest concern on investors' minds is the Iraq situation," said James Maguire, a specialist at LaBranche & Co. "Nobody knows where things are going from here and the market hates uncertainty."
Concern that the Federal Reserve may soon raise interest rates to cool the economy and fend off inflation also sent stocks lower. A government report due today may show the economy expanded at a 5 percent annual rate last quarter, according to the median of 74 forecasts gathered by Bloomberg news.
An index of raw materials shares had its biggest decline in more than a year on concern demand from China will erode. Growth in Asia's second-largest economy will slow to less than 8 percent this year from a six-year high of 9.1 percent in 2003, said Wu Xiaoling, vice governor of the People's Bank of China, in an interview.
Alcoa lost $1.29 to $31.01 and U.S. Steel dropped $2.82 to $30.56.
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