War rhetoric and a flurry of doleful earnings reports caused the markets to fall for the fifth straight day yesterday, wiping out most of the year's gains.
The Dow Jones industrial average retreated 124.17 points, or 1.5 percent, to close at 8318.73.
The Standard & Poor's 500-stock index fell 9.26 points, or 1 percent, to 878.36. The Nasdaq composite index dipped 4.77 points, or 0.3 percent, to 1359.48.
The past week's declines marked a definite change in mood from earlier this month, when investors pumped up prices on signs of a manufacturing recovery, the possibility of a stimulus package and speculation on improvement in the technology sector. Those gains are now gone. The Dow is off 0.3 percent for the year, and the S&P is down 0.2 percent. The Nasdaq has shaved its 2003 gain to 1.8 percent.
A third of the Dow's decline was driven by an earnings shock from Eastman Kodak, whose fourth-quarter operating results fell short of analysts' projections. "Our forecast for 2003 reflects the expectation that economic conditions will remain weak, compounded by rising political tensions," said Kodak chairman and chief executive Daniel A. Carp.
The company also said it won't meet first-quarter expectations and is cutting up to 2,900 jobs, or 3 percent of its workforce, in the United States and Western Europe to curb costs. Kodak will take a charge of $75 million to $100 million for expenses related to the layoffs.
A lack of an imminent end to or defusing of the Iraq crisis also disquieted investors. France's threat to veto a U.N. resolution authorizing military action in Iraq, coupled with President Bush's increasingly bellicose statements about the Iraqi government's noncompliance with weapons inspectors, continued to cause jitters in the markets.
Earnings season is in full swing, but companies have given investors little hope for revenue growth in the coming year. Instead, they are promising improvements in operating results because of smaller workforces and reduced investment in information technology, factories and production equipment.
"If companies are to be believed, 2003 isn't shaping up as a recovery year," said Christopher Wolfe, an equity market strategist at J.P. Morgan Private Bank in New York.
Of the 141 companies in the S&P 500 that have reported results so far, 58 percent have beat estimates, 24 percent have met estimates and 16 percent have missed estimates, according to Thomson First Call.
But analysts have repeatedly lowered their earnings expectations for the fourth quarter since early December, and companies are beating estimates by an average of only 3.8 percent. So far, firms have reported an increase in earnings per share averaging 9.7 percent, but that gain has been wrenched almost entirely from cost-cutting, not from increased business.
"What's missing in this economy is capital spending expansion," said Alan W. Kral, a portfolio manager at Trevor Stewart Burton & Jacobsen in New York.
J.P. Morgan reported a wider fourth-quarter loss because of a $1.3 billion charge it took to cover its share of settlements related to Enron. Shares of J.P. Morgan fell 2.83 percent, or 72 cents, to $24.70.
Merrill Lynch, repeating what has become a familiar theme this earnings season, said quarterly revenue fell 12 percent, to $4.2 billion, but operating income rose to 64 cents per share from 51 cents. The financial services firm's stock dropped 4.6 percent, or $1.83, to $38.25 per share.
Lucent Technologies also reported improved results on less revenue. The telecommunications equipment company narrowed its fiscal first-quarter loss; its shares rose 7.7 percent, to $1.81.
AMR Corp., parent of American Airlines, reported a narrower net loss of $529 million on increased revenue. Shares of AMR plunged 23.1 percent, closing at $3.77.
Pharmaceutical giant Pfizer said strong sales of its drugs fueled a 46 percent jump in income on a 14 percent rise in revenue. The news spurred a gain of 0.7 percent in Pfizer's stock, to $30.71 per share.
* The New York Stock Exchange composite index fell 53.30, to 4962.98; the American Stock Exchange index fell 3.44, to 819.93; and the Russell 2000 index of smaller-company stocks fell 2.64, to 380.53.
* Declining issues outnumbered advancing ones by 16 to 9 on the NYSE, where trading volume rose to 1.58 billion shares, from 1.35 billion on Tuesday. On the Nasdaq, decliners outnumbered advancers by 3 to 2 and volume totaled 1.45 billion, up from 1.34 billion.
* The price of the Treasury's 10-year note rose $4.38 per $1,000 invested, and its yield fell to 3.92 percent, from 3.97 percent on Tuesday.
* The dollar rose against the Japanese yen and the euro. In late New York trading, a dollar bought 118.34 yen, up from 118.13 late Tuesday, and a euro bought $1.0716, down from $1.0724.
* Light, sweet crude oil for March delivery settled at $32.85 a barrel, down 34 cents, on the New York Mercantile Exchange.
* Gold for current delivery rose to $359.70 a troy ounce, from $357.30 on Tuesday, on the New York Mercantile Exchange's Commodity Exchange.