NEW YORK -- Wall Street slid to its lowest levels in three months Friday, as war anxieties and a brokerage downgrade of insurance giant American International Group sparked fears of a faltering economy in the coming months. The Dow Jones industrials dropped about 240 points.
Analysts say many investors wanted to dump shares ahead of Monday's key report by U.N. officials on arms inspections in Iraq and President Bush's State of the Union address Tuesday. Their comments are expected to signal whether war is imminent.
"It's war jitters," said Larry Wachtel, market analyst at Prudential Securities. "When you have all this nagging uncertainty, you have this abdication. People have backed away and said, 'Let's wait till next week."'
The Dow fell 238.46, or 2.9 percent, to close at 8,131.01, according to preliminary calculations. It was the fourth triple-digit loss in five days, sending blue-chip stocks to their lowest levels since Oct. 16, when they closed at 8,036.03.
The broader market also finished sharply lower. The Standard & Poor's 500 index dropped 25.93, or 2.9 percent, to 861.41, also its lowest level since Oct. 16, when it closed at 860.02. The Nasdaq composite index fell 46.12, or 3.3 percent, to 1,342.15, the lowest finish since Dec. 31.
For the week, the three main indexes posted their second losing week, with the Dow falling 5.3 percent, the Nasdaq dropping 2.5 percent and the S&P 500 losing 4.5 percent.
American International Group dropped $4.89 to $56.04 after Morgan Stanley cut the insurer's stock rating to "equal weight" from "overweight."
CMS Energy lost $2.47, or 28.9 percent, to $6.07 after the company suspended its dividend and said its 2002 net loss would be worse than expected.
Amgen declined $1.26 to $52.24 after the biotech company reported a quarterly profit that was in line with analysts' estimates.
Analysts say tepid corporate earnings outlooks issued in recent days have dampened investor optimism, leading to selling that has erased Wall Street's New Year's rally. Concerns about a war with Iraq also weigh heavily on the market.
"There's an obsessive-compulsive look at Iraq right now. Despite many in-line earnings news, all they see is reports on Saddam and an escalation of a potential conflict," said Philip S. Dow, managing director of equity strategy at Dain Rauscher Wessels.
Analysts said investors should not be overly concerned about Friday's declines, citing the 1990-91 market reaction to the Gulf War, when stocks slid as war approached but rallied once the conflict began.
"Traditionally, when this kind of uncertainty over a conflict, the markets trade down until the bombs drop," Dow said. "There will be days it will look at some earnings news and trade up, but the market is going to stay in a volatile range."
In addition, while the Dow and S&P 500 hit three-month lows, they're still well above their multi-year lows reached on Oct. 9, analysts said. On that date, blue-chip stocks closed at 7,286.27 and the S&P dropped to 776.76.
Broadcom Corp. slid $2.50 to $15.11 after the communications chip maker's chief executive, Henry Nicholas, unexpectedly announced his resignation, citing family reasons. Chief operating officer Alan E. Ross was named as interim CEO.
Winners included Nortel Networks, which gained 18 cents to $2.58, after the telecommunications equipment maker posted a fourth-quarter loss that was narrower than analysts' expectations; it also expects to achieve profitability, excluding one-time charges, by the second quarter.
Defense contractor Raytheon rose $1.61 to $30.16 after reporting a narrower fourth-quarter loss but posted profits from continuing operations that matched Wall Street estimates.
Declining issues outnumbered advancers 11 to 3 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, a barometer of smaller company stocks, dropped 8.62, or 2.3 percent, to 375.06.
Overseas, Japan's Nikkei stock average finished 0.7 percent lower Friday. In Europe, France's CAC-40 dropped 0.7 percent, Britain's FTSE 100 declined 0.5 percent and Germany's DAX index slid 3.3 percent.
On Friday, the Dow slid 238.46, or 2.9 percent, to close at 8,131.01. It was the fourth triple-digit loss in five days, sending blue-chip stocks to their lowest levels since Oct. 16. The Standard & Poor's 500 index dropped 25.94, or 2.9 percent, to 861.40, also its lowest level since Oct. 16. The Nasdaq composite index fell 46.13, or 3.3 percent, to 1,342.14, the lowest finish since Dec. 31.
WHERE THE INDEXES STAND COMPARED WITH OCT. 9, WHEN THEY HIT FIVE- AND SIX-YEAR LOWS: The Dow is 844.74, or 11.6 percent, above its five-year low of 7,286.27. The Nasdaq is 228.03, or 20.5 percent, above its six-year low of 1,114.11. The S&P is 84.64, or 10.9 percent, above its six-year low of 776.76.
SO FAR IN 2003: The Dow is down 210.62, or 2.5 percent. The Nasdaq is up 6.63, or 0.5 percent. The S&P is down 18.42, or 2.1 percent.
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