Tuesday, April 11, 2006

Stocks Fall on Iran, Inflation Worries

News Article
April 11, 2006

Business Week Online

Stocks Fall on Iran, Inflation Worries

The Iranian president said the country was producing enriched uranium. Meanwhile, crude futures hit a seven-month high

Stocks finished broadly lower Tuesday, as Iran news and rising commodity prices offset upbeat quarterly results from Dow component Alcoa (AA ). Treasury yields remained near recent peaks amid ongoing inflation concerns, says Standard & Poor's MarketScope.

The Dow Jones industrial average fell 51.7 points, or 0.46%, to 11,089.63, trailed by Verizon (VZ ). The broader Standard & Poor's 500 index dipped 10.04 points, or 0.77%, to 1,286.56. The tech-heavy Nasdaq composite skidded 22.92 points, or 0.98%, to 2,310.35.

A flurry of gloomy news dampened sentiment Tuesday, after an initial advance. "There are multiple negative catalysts to the market today," says Art Hogan, chief market analyst at Jefferies & Co. "You throw all that together and the market isn't going to be rejoicing."

Markets were weighing geopolitical news Tuesday. Iranian President Mahmoud Ahmadinejad announced that Iran had successfully enriched uranium, following similar remarks by former Iranian President Hashemi Rafsanjani. Separately, U.S. President George W. Bush dismissed reports his administration was preparing plans for air strikes against Iran as "wild speculation."

For a second straight day, the calendar was light on economic data. Investors will get a fresh helping Wednesday with the release of the February trade deficit. Action Economics forecasts a reading of $68.2 billion, but says investors may be in for a surprise, as other projections vary widely.

Financial heavyweights Merrill Lynch (MER ) and Goldman Sachs (GS ) were lower Tuesday after a Merrill analyst, two Goldman employees and a worker at a plant that printed Business Week were charged in a $6.7 million insider-trading scheme.

Meanwhile, Merck (MRK ) was lower after a jury added $9 million to the damages the drugmaker must pay related to its Vioxx painkiller.

The session kicked off with solid earnings news. Aluminum giant Alcoa (AA ) was higher after late Monday posting first-quarter profit that nearly doubled, beating analyst estimates. Drugmaker Genentech (DNA ) is on deck after the closing bell.

Chipmaker Micron Technology (MU ) was higher after reporting a 64% increase in second-quarter profit, despite a 6.3% drop in sales.

Later in the week, rival Advanced Micro Devices (AMD ), newspaper publisher Gannett (GCI ), motorcycle maker Harley-Davidson (HDI ) and industrial giant General Electric (GE ) are among companies set to post quarterly results.

Elsewhere, Wal-Mart (WMT ) was lower after community bankers asked regulators to block the retailer's plan to expand into banking.

Automaker General Motors (GM ) was lower after selling its stake in truckmaker Isuzu for about $300 million.

Cellular phone maker Nokia (NOK ) was higher after the company said its first-quarter phone sales topped its previous forecasts.

The NASDAQ Stock Market (NDAQ) reportedly purchased a 15% stake in the London Stock Exchange for about $780 million, becoming the bourse's biggest shareholder.

On the brokerage front, Bausch & Lomb (BOL) was sharply lower after Piper Jaffray cut the stock from outperform to market perform. The contact lens maker temporarily halted shipments of its ReNu solution with MoistureLoc due to reports of fungal infections.

In the energy markets Tuesday, May West Texas Intermediate crude oil futures closed up 24 cents at $68.98, a seven-month closing high.

European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 50.5 points, or 0.83%, to 6,016.5. Germany's DAX index was off 94.93 points, or 1.58%, to 5,908.47. In Paris, the CAC 40 index dropped 77.67 points, or 1.5%, to 5,112.6.

Asian markets finished lower. Japan's Nikkei 225 index slipped 38.45 points, or 0.22%, to 17,418.13. In Hong Kong, the Hang Seng index fell 45.78 points, or 0.28%, to 16,521.59. Korea's Kospi index sank 12.21 points, or 0.87%, to 1,386.08.

Treasury Market

Treasury yields remained close to multi-year highs, says S&P MarketScope. Prices for 10-year Treasury notes were modestly higher at 96-22/32 with a yield of 4.93%, while 30-year bonds rose to 92-08/32 for a yield of 5%.

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