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Wall St. Suffers Worst Day in Two Years

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  • Greg Cannon
    http://story.news.yahoo.com/news?tmpl=story&cid=543&ncid=749&e=1&u=/ap/20050415/ap_on_bi_st_ma_re/wall_street Wall St. Suffers Worst Day in Two Years 2 minutes
    Message 1 of 2 , Apr 15, 2005

      Wall St. Suffers Worst Day in Two Years

      2 minutes ago

      By MICHAEL J. MARTINEZ, AP Business Writer

      NEW YORK - Wall Street suffered its worst single day
      in nearly two years Friday, with the Dow Jones
      industrial average falling 191 points for its third
      straight triple-digit loss. Deepening concerns over
      economic growth and higher prices led to the worst
      week of trading since August.

      An already uneasy market began the biggest one-day
      selloff since May 19, 2003, after the Federal Reserve
      reported drops in manufacturing and other industrial
      production, and a Labor Department report showed
      higher oil costs driving up import prices.

      The selloff was bolstered by lower-than-expected
      profits from IBM Corp., which led to fears that
      technology spending would be substantially worse than
      expected this year. Strong earnings from General
      Electric Co. and Citigroup Inc. were overlooked, but
      analysts said earnings would nonetheless be a key
      factor in overcoming the recent slump.

      "Earnings are really the only hope for this market,"
      said Brian Pears, head equity trader at Victory
      Capital Management in Cleveland. "If, on the whole,
      earnings can go up, then we might be able to overcome
      oil and inflation and all the other things."

      According to preliminary calculations, the Dow fell
      191.24, or 1.86 percent, to 10,087.51, after falling
      125 points Thursday and 104 points Wednesday. It was
      the Dow's lowest close since Nov. 2.

      Broader stock indicators also lost considerable
      ground. The Nasdaq composite index dropped 38.56, or
      1.98 percent, to 1,908.15 for its worst showing since
      Oct. 25.

      The Standard & Poor's 500 index was down 19.43, or
      1.67 percent, at 1,142.62, its lowest level since Nov.

      All three indexes set five-month lows for the second
      straight session, prompted by disappointing earnings
      in the tech sector and questions about slowing
      economic growth. With Friday's losses, it was the
      first time the Dow lost 100 points three sessions in a
      row since late January 2003.

      For the week, the Dow lost 3.57 percent, the S&P 500
      was down 3.27 percent, and the Nasdaq tumbled 4.56
      percent. The major indexes are also at their lowest
      points of 2005, with the Nasdaq down 12.29 percent,
      the Dow falling 6.45 percent and the S&P having lost
      5.72 percent.

      Bond investors were pleased with Friday's results,
      however, as the bond market continued to rally. The
      yield on the 10-year Treasury note fell to 4.24
      percent from 4.34 percent late Thursday. The dollar
      was mixed against other major currencies, while gold
      prices moved higher.

      Crude oil prices were lower and continued a two-week
      downtrend, with a barrel of light crude settling at
      $50.49, down 64 cents, on the New York Mercantile

      The recent drop in crude futures notwithstanding,
      higher oil prices are to blame for the jump in import
      prices, the Labor Department said. Import costs rose
      1.8 percent in March, but even without oil, prices
      rose 0.3 percent, more than the 0.2 percent rise
      economists had expected.

      "There's a lot of evidence that when we have oil
      averaging $53 or $54 per barrel, that's inflationary,
      and we got a whiff of that today in the import
      prices," said Peter Cardillo, chief strategist and
      senior vice president with S.W. Bach & Co. "It doesn't
      help that we're starting to see the economy enter a
      slowing mode heading into the second quarter here."

      Investors looking at the Fed's industrial output
      report also questioned whether higher energy and
      materials costs were affecting manufacturing growth as
      well. Overall industrial production rose 0.3 percent
      in March, up from 0.2 percent in February, but the
      increase came only from utility production due to a
      colder-than-average month, and manufacturing and other
      industrial sectors showed losses for the first time in
      six months.

      IBM said an inability to close deals before the end of
      the quarter, combined with higher pension costs,
      dragged on its earnings. The technology company, which
      missed Wall Street forecasts by 6 cents per share,
      hinted at a major restructuring this year. IBM tumbled
      $6.94, or 8.3 percent to $76.60, and was the biggest
      loser on the Dow.

      General Electric rose 25 cents to $35.75 after the
      industrial and media conglomerate reported a 25
      percent jump in first-quarter profits, with nine of
      the company's 11 disparate divisions reporting
      double-digit growth. The company's forecasts for the
      second quarter and full year were in line with Wall
      Street's estimates.

      Citigroup beat Wall Street's expectations for its
      quarterly profits by 2 cents per share, with profits
      rising a modest 3 percent year-over-year. The
      financial company also said its board had authorized
      the repurchase of an additional $15 billion in stock.
      Citigroup added 35 cents to $45.75.

      The lagging pharmaceutical sector saw new life after
      Genentech Inc. reported strong results from trials of
      its Avastin drug in breast cancer patients, and Ely
      Lilly & Co. received a favorable patent ruling on its
      best-selling anti-psychotic drug Zyprexa. Genentech
      surged $10.72, or 18.3 percent, to $69.35, while Lilly
      climbed $2.91 to $58.07.

      Declining issues outnumbered advancers by more than 4
      to 1 on the New York Stock Exchange, where preliminary
      consolidated volume came to 2.71 billion shares,
      compared with 2.38 billion on Thursday.

      The Russell 2000 index of smaller companies was down
      11.16, or 1.89 percent, at 580.78. The Russell lost
      4.91 percent this week and is down 10.86 percent for
      the year.

      Thursday's losses in U.S. markets had a ripple effect
      overseas, as the Nikkei stock average fell 1.66
      percent. In Europe, Britain's FTSE 100 closed down
      1.09 percent, France's CAC-40 lost 1.92 percent for
      the session, and Germany's DAX index tumbled 2.04


      The Dow Jones industrials ended the week down 373.83,
      or 3.57 percent, finishing at 10,087.51. The S&P 500
      index lost 38.58, or 3.27 percent, to close at

      The Nasdaq fell 91.20, or 4.56 percent, during the
      week, closing Friday at 1,908.15.

      The Russell 2000 index, which tracks smaller company
      stocks, closed the week 29.97, or 4.91 percent, lower
      at 580.78.

      The Dow Jones Wilshire 5000 Composite Index � a
      free-float weighted index that measures 5,000 U.S.
      based companies � ended the week at 11,246.79, off
      387.80 points from last week. A year ago the index was
      at 11,078.10.

      The Wilshire 5000 dropped 446.24 points, or 3.82
      percent, in the past three sessions, the largest
      percentage drop since Nov. 11, 2002, when the
      total-market index fell 5.1 percent.


      On the Net:

      New York Stock Exchange: http://www.nyse.com

      Nasdaq Stock Market: http://www.nasdaq.com
    • Ram Lau
      Bush Points to a Retirement System With Mixed Results By Peter G. Gosselin and Edwin Chen, Times Staff Writers KIRTLAND, Ohio — President Bush came to Ohio
      Message 2 of 2 , Apr 16, 2005
        Bush Points to a Retirement System With Mixed Results
        By Peter G. Gosselin and Edwin Chen, Times Staff Writers

        KIRTLAND, Ohio — President Bush came to Ohio on Friday to highlight a
        state retirement savings system that he said showed that Americans
        would be better off handling their own old-age investments through
        personal accounts than relying on traditional Social Security.

        But that state's version of personal accounts has attracted few takers
        among the people eligible — Ohio's 750,000 public employees. And
        records show that the most widely chosen version of the state-offered
        accounts has racked up a five-year earning record of 1.86%, about the
        same return that the president says Social Security produces.

        "Boy, does he have a hard sell ahead of him in using Ohio as his
        example," said Keith Brainard, research director of the National Assn.
        of State Retirement Directors, which represents virtually all of the
        nation's public employee pension plans.

        "Ohio's individual account programs are only a few years old, and in
        the short time they've been around, investment returns have been
        relatively weak." Brainard said.

        Coming two weeks before the end of his "60 Stops in 60 Days" campaign
        to convince the nation that Social Security needs to be reshaped,
        Bush's Ohio appearance illustrated the difficulty the president faced
        in promoting his plan to a nation edgy about a still-uncertain
        economic recovery and a stock market that had taken a steep dive in
        recent days.

        Bush has proposed allowing workers under 55 to divert a portion of
        their Social Security taxes into private stock and bond accounts. In
        return, they would agree to a cut in their traditional Social Security

        The president has said the private accounts should be part of a
        broader plan to shore up the shaky finances of the Social Security
        system. That broader, still-undefined plan might include further
        benefit cuts or tax increases.

        But several recent polls show the president's proposal losing ground
        amid concerns that private accounts would require Americans to
        shoulder more economic risk for the possibility of a greater reward.

        And the president's cause was unlikely to be helped by a stock market
        that wrapped up its worst week in two years Friday, with the Dow Jones
        industrial average diving 191 points. The Dow slumped 3.6% for the
        week, and the tech-heavy Nasdaq index fell nearly 5%.

        None of this appeared to faze Bush, however, as he took the stage at
        Lakeland Community College in Kirtland to lavish praise on an Ohio
        public employee retirement system that he said held important lessons
        for the White House and Congress in how to restructure Social Security.

        "We need to come together in Washington … to work on a permanent fix
        [for Social Security]. All options are on the table," Bush declared.

        But he quickly suggested that any overhaul include personal accounts,
        which congressional Democrats have said they will adamantly oppose if
        — as Bush has proposed — they involve diverting payroll tax revenue
        from the existing system.

        Part of any Social Security fix, the president told his audience,
        should be "to trust people with their own money, to devise a system
        that would work similar to the state of Ohio, that would say, 'We're
        going to let you earn a better rate of return for your money.' "

        But in the biggest of Ohio's several state retirement programs, the
        popularity of the private accounts and the returns they produce are
        relatively low.

        Ohio is one of half a dozen states that have begun to offer
        401(k)-like retirement accounts through which eligible employees can
        invest in a handful of state-screened mutual funds or other portfolios.

        Employees who choose accounts risk losing money if the value of their
        investments falls, but reap most of the reward if the value rises.

        Ohio has continued to offer traditional pensions, where the state
        bears the risk and promises to pay retirees a certain amount for as
        long as they live. Employees can choose between the traditional
        pension and the private accounts, or pick a plan that mixes the two.

        The state began offering the private accounts to state college
        faculties in 1998, and extended them to other workers early in this
        decade. Ohio has five major retirement systems for teachers, police,
        firefighters and other public employees.

        It was unclear from the president's remarks and from an
        administration-issued news release which of the five plans Bush was
        discussing in his appearance Friday, or what option he was focusing
        on. The White House referred calls to spokesman Trent Duffy, who could
        not be reached.

        But in the biggest of the state's plans — the 522,000-member Ohio
        Public Employees Retirement System, or OPERS — the personal account
        option has not proven particularly popular among state workers, or
        delivered a particularly good rate of return.

        About 10,000 of those eligible for personal accounts — less than 5% —
        have signed up for the accounts since they became available at the
        start of 2003, according to Laurie Fiori Hacking, OPERS' executive

        Of those who have chosen the accounts, most have directed that their
        money be invested in the system's "moderate" or "aggressive" pre-mixed
        portfolios, according to spokesman Richard Baker.

        OPERS records show that the "moderate" account lost money in two of
        the last four years and during the first three months of this year. It
        posted a five-year annualized return of 1.86%.

        That compares to the 1.8% that Bush said Friday was the rate of return
        for Social Security.

        The OPERS "aggressive" portfolio had a five-year return of 0.26%.

        By contrast, the fund that pays for the system's traditional pensions,
        which is handled by professional money managers, had a five-year
        return of 3.52%.

        Personal accounts have also had relatively few takers in the state's
        other big plan, the State Teachers Retirement System of Ohio, where
        12,500 of the plan's 225,000 members — less than 6% — have chosen
        personal accounts, said Laura Ecklar, spokeswoman for the teachers' system

        Ecklar said it was impossible to tell how personal account holders had
        fared, because no single investment option offered by the teachers'
        retirement system was so favored by participants that it could serve
        as a representative for all.

        During his Ohio appearance, the president was accompanied by several
        retirement plan participants.

        Among them was a University of Cincinnati employee who said she was
        making 6% on a "guaranteed" account that sets a floor under and a cap
        on what people can make. Another person said he was making 7.1% on a
        hybrid plan.

        In a pitch directed to Democratic lawmakers, who are nearly unanimous
        in opposing Bush's plan to create Social Security personal accounts,
        the president called for "political amnesty" for those who joined his
        drive to retool the retirement program.

        "All ideas are on the table," he asserted at several points in his

        His declaration appeared to reinforce a suggestion made Thursday by
        his top economic advisor, Allan B. Hubbard, that the voluntary
        retirement accounts might be acceptable to Bush even if they were
        offered as an "add-on" to Social Security, instead of being financed
        by current payroll taxes, as the president was advocating.
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