c n n blames iran for market slump

Stocks post third down day in four
Major gauges stumble on a new round of pricing pressure concerns, led by Iran, oil, gold and rates.
By Alexandra Twin, CNNMoney.com senior writer
April 11, 2006: 6:18 PM EDT


NEW YORK (CNNMoney.com) - Stocks slumped Tuesday, as worries about higher oil prices, inflation and Iran's nuclear capabilities sparked a broad-based selloff.

The session's negatives trumped any enthusiasm about the start of the earnings-reporting period.




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The Nasdaq composite (down 22.92 to 2,310.35, Charts) sank 1 percent.

The Dow Jones industrial average (down 51.70 to 11,089.63, Charts) lost around 0.5 percent and the broader Standard & Poor's 500 (down 10.05 to 1,286.57, Charts) index lost around 0.8 percent.

All three major gauges have fallen for three of the last four sessions on worries about higher inflation and how it might impact Federal Reserve interest-rate policy.

Wednesday brings reads on the February trade balance and the weekly oil inventories. Investors will also keep an eye on the bond market and the latest batch of earnings, including electronics retailer Circuit City (Research), which is due to report Wednesday before the start of trade.

Despite the mild reaction to Alcoa's earnings Tuesday, strong corporate results should be a positive catalyst going forward, said James Awad, president at Awad Asset Management

"I expect earnings for the quarter and the forward-looking statements to be positive," said Awad. "That should take the edge off the concerns regarding interest rates and oil prices."

Stocks rose Tuesday morning following upbeat earnings from Alcoa, and bullish news out of Nokia. But the gains soon fizzled, with investors returning to the broader focus that has hemmed in the stock market of late.

"I think the Iranian announcement is a big drag on the market," said John Davidson, president at PartnerRe Asset Management. "It raises concerns both in terms of political unrest and in terms of how it might impact the oil market."

Iran's president confirmed Tuesday that the country has produced enriched uranium for the first time, and that Iran has "joined the countries with nuclear technology."

Oil prices seesawed through the day but stayed near all-time highs of over $70 a barrel as investors weighed the odds of supply disruptions from Iran, one of the world's biggest exporters of crude.

U.S. light crude oil for May delivery gained 24 cents to settle at $68.98 a barrel on the New York Mercantile Exchange.

After the close, Genentech (Research) reported higher-than-expected quarterly earnings that topped forecasts. Nonetheless, shares dipped in extended-hours trading, with investors taking a 'sell the news' approach. (Full story).

What moved?
Technology shares were hit particularly hard, including the influential chip sector.

The Philadelphia Semiconductor (down 7.52 to 503.34, Charts) index, or the SOX, lost 1.5 percent.

Computer hardware makers slipped too, dragging down the Goldman Sachs Hardware (Charts) index by 1 percent.

Telecom and computer networking shares were down as well, after having risen soundly in the recent advance.

Ciena (down $0.26 to $4.20, Research) and JDS Uniphase (down $0.17 to $3.59, Research) were among the Nasdaq's big losers.

Weakness in biotechnology also burdened the Nasdaq, with the Amex Biotechnology (Charts) index losing close to 2 percent.

Blue-chip declines were broad as well, with 23 out of 30 Dow issues retreating, led by IBM (down $0.94 to $81.16, Research), Honeywell (down $0.74 to $41.89, Research) and Hewlett Packard (down $0.56 to $32.54, Research).

Dow financial components American Express (down $0.60 to $51.25, Research) and Citigroup (down $0.46 to $47.47, Research) declined as well, falling with the broader bank sector.

Oil stocks slumped, with the Philadelphia Oil Service (Charts) sector index losing 1.9 percent.

Among other movers, Bausch & Lomb (down $8.41 to $49.03, Research) tumbled 14.6 percent in unusually active New York Stock Exchange trading after the contact lens maker halted shipping its ReNu contact lens solution after some users suffered serious eye infections. Analysts speculate the move could hurt Bausch's other product lines.

Merck (down $0.36 to $34.06, Research) shares inched lower after a jury said the company deliberately misrepresented the dangers of its withdrawn painkiller Vioxx to federal regulators, and ordered the drugmaker to pay $9 million in punitive damages to a man who had a heart attack after taking Vioxx. (Full story.)

Although the stock was not much lower, PartnerRe's Davidson said that "the public awarding of punitive damages is a dampening in terms of overall market sentiment."

Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost three to one on volume of roughly 1.58 billion shares. On the Nasdaq, decliners topped advancers by eleven to four on volume of 2.13 billion shares.

Earnings start off strong
Stocks had started the session in positive territory, boosted by a strong start to the quarterly-earnings reporting period.

After the close Monday, Alcoa unofficially kicked off the first-quarter earnings, posting results that soundly beat estimates.

The aluminum producer said it earned 69 cents a share versus 30 cents a year ago. Analysts thought it would earn 51 cents per share, according to a survey of analysts by Thomson Financial. Alcoa (up $1.26 to $34.09, Research) shares gained 3.8 percent Tuesday morning.

Market watchers say the first-quarter earnings should continue to come in strong. Earnings are expected to have risen more than 10 percent versus a year ago.

Nokia (up $0.79 to $21.19, Research) shares gained as well. Late Tuesday, the cell phone leader reported an average selling prices for its phones in the first quarter that was higher than its earlier forecast.

Treasury prices continued to gain, moving the 10-year note yield away from the key 5 percent level it approached last week. The gains lowered the yield on the benchmark 10-year note to 4.92 percent from 4.95 percent late Monday. Bond prices and yields move in opposite directions.

COMEX gold for June delivery slipped $2.40 to settle at $599.40 an ounce.

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