Nagging worries about inflation bogged down Wall Street Tuesday, with investors sending stock prices lower as they tried to reconcile solid economic and earnings news, reports of anthrax at the Pentagon and a gloomy outlook for semiconductor stocks.
Concerns that higher crude oil prices, which topped $55 per barrel Tuesday, would accelerate inflation and lead to rising interest rates eroded investor confidence, and the Pentagon’s announcement about the discovery of anthrax in its mailroom added to the unease.
The nervousness made it difficult for Wall Street to rise on good news from the retail sector. While the 0.5 percent growth in February retail sales fell slightly below Wall Street expectations, the Commerce Department revised its January figure upward, and auto sales were surprisingly strong in both months. Record earnings from Lehman Brothers Holdings Inc. were also discounted, and stock indices turned negative mid-session.
“There’s not enough positive news to get investors to commit to new positions at this point,” remarked Michael Sheldon, chief market strategist at Spencer Clarke LLC. “There’s a malaise hanging over the market right now without much of a catalyst to move higher.”
The Dow Jones industrial average was down 59.41 points, or 0.6 percent, at the close of trading, while the broader Standard & Poor’s 500-stock index was down 9.08 points, or 0.8 percent. The Nasdaq composite index, full of technology stocks, lost 16.06 points, or 0.8 percent, dragged down by semiconductor stocks, which suffered after a Merrill Lynch analyst said growth in chip stocks would likely be stalled for much of the year.
Crude oil prices rose as investors worried that OPEC may not follow Saudi Arabia’s lead and increase oil production. A barrel of light crude settled at $55.05, up 10 cents on the New York Mercantile Exchange.
The bond market slipped, with the yield on the 10-year Treasury note rising to 4.54 percent from 4.51 percent late Monday. Gold prices fell slightly, while the U.S. dollar rose against the euro and was mixed against other major currencies.
Wall Street paid close attention to Federal Reserve Chairman Alan Greenspan’s testimony on Capitol Hill, hoping to hear his latest views on inflation and interest rates. Greenspan, whose topic Tuesday was Social Security, warned that federal budget deficits, not inflation, remained the greatest threat to the economy.
Lehman Brothers’ earnings benefited from strong investment banking revenues and advisory fees from the recent wave of merger activity. The brokerage beat Wall Street estimates by 71 cents per share. Lehman gained $2.87 to $96.19.
The Philadelphia Semiconductor Index was off 2.12 percent in response to the Merrill Lynch report on chip stocks, while Dow component Intel Corp. fell 39 cents to $23.88 and Advanced Micro Devices Inc. lost 37 cents to $16.07.
Drug maker Genentech Inc. slid 75 cents to $54.25 after having been strongly higher most of the session. The company announced that studies showed its colon cancer drug Avastin was effective in treating lung cancer patients as well. The news led to two brokerage upgrades of Genentech’s stock.
American International Group Inc.’s longtime chief executive, Hank Greenberg, officially stepped down late Monday, remaining as non-executive chairman. The Dow component also announced a major reshuffling of the executive ranks, to be headed by new CEO Martin Sullivan. AIG lost $1.93 to $61.92.
TiVo Inc. soared $2.87, or 74.9 percent, to $6.70 after the maker of television recorders agreed to a deal with Comcast Corp., the cable operator, that would make TiVo technology available to Comcast customers. Comcast was down 8 cents at $33.91.
Overseas, Japan’s Nikkei stock average fell 0.3 percent. In Europe, Britain’s FTSE 100 closed up 0.5 percent, France’s CAC-40 climbed 0.7 percent for the session and Germany’s DAX index rose 0.5 percent.