Disappointing Data Drive Stocks Lower

Stocks slumped Tuesday in thin post-holiday trading, as investors mulled over weaker-than-expected economic data.

Gold continued to surge, boosted in part by escalating tensions between India and Pakistan.

On Wall Street, the Dow Jones industrials closed down 122.68 points, or 1.2%, at 9,981.58. It was the Dow’s first close below 10,000 since May 10 and followed a 111-point drop Friday.

The Nasdaq composite lost 9.32 points, or 0.6%, to 1,652.17, though it had been down as much as 29 points before rebounding.

Light trading, the result of many investors extending their Memorial Day vacations, made the market susceptible to greater volatility, analysts said.

Losers topped winners by 9 to 7 on the New York Stock Exchange and by 19 to 16 on Nasdaq.

Wall Street got off to a negative start early in the session on consumer data that showed improvement but not as much as investors and analysts had anticipated.

The Conference Board reported that its consumer confidence index rose in May to 109.8 from a revised 108.5 in April. But a gauge of consumers’ expectations declined.

“It wasn’t bad economic data; it just didn’t surprise us on the upside,” said John Forelli, portfolio manager for Independence Investment. “The market needs good news to make it go forward, and there’s just a dearth of good news right now.”

Some blue chips were hurt by new research reports from analysts. Home Depot dropped $1.88 to $41.54, its lowest since November, after brokerage UBS Warburg downgraded the stock to “hold” from “buy,” citing concerns about the retailer’s shifting business strategy and high-level executive departures.

In the tech sector, Intel lost 31 cents to $28.35, after falling as low as $27.67. Merrill Lynch reduced its near-term earnings estimates for the chip maker.

Merrill analyst Joseph Osha cut his second-quarter earnings forecast for Intel to 17 cents from 18 cents a share, citing potential weakness in orders from some computer makers.

Some investment pros say domestic investors are concerned about the continuing barrage of bad news on corporate accounting, while the weaker U.S. dollar is discouraging foreign buyers.

“There is no sense of confidence” in U.S. stocks, Rick Campagna, co-head of research at Shaker Investments Inc. in Cleveland, told Bloomberg News.

The euro’s value rose to almost 93 cents, an eight-month high, on speculation that Europe may enjoy a more robust recovery than the United States. The yen also gained against the dollar.

In other markets, near-term gold futures gained $3.40 to $324.10 an ounce in New York. It was the eighth advance in nine sessions and pushed the metal to a 21/2-year high.

Traders said fear of war between India and Pakistan was stoking an already bullish gold market.

Gold stocks, among this year’s hottest issues, were mostly higher again as a result. Goldcorp surged $1.05 to $23.21, and Newmont Mining jumped $1.34 to $32.

Elsewhere in commodities trading, copper futures had their biggest gain in 31/2 months after Australia’s BHP Billiton said it would extend a production cutback at a Chilean mine by six months, reducing output by 20% from 2001 levels. Near-term copper futures rose 1.85 cents to 75.5 cents a pound in New York.

Among Tuesday’s highlights:

* Blue chips under pressure included Coca-Cola, down $1.56 to $54.64, and 3M, down $1.17 to $126.78.

* Procter & Gamble led consumer products stocks lower, perhaps on worries about consumer spending. P&G; fell $2.25 to $88.01, Alberto-Culver lost $1.40 to $52.76, and Colgate-Palmolive dropped $1.24 to $52.22.

* In the retail sector, Federated Department Stores lost $1.05 to $41.18, Kohl’s fell $1.19 to $73.93, and Sears, Roebuck was off $1.30 to $56.15.

* Among major tech names, IBM fell $1.02 to $82.08, Motorola lost 18 cents to $16.67, and Cisco Systems was down 19 cents to $16.38. But Hewlett-Packard added 1 cent to $18.70, and Oracle rose 9 cents to $8.94.

* Biotech was a bright spot, as some shares in that sector continued to rebound on recent positive news about new drug approvals. Biogen rose $1.19 to $50.66, Cephalon gained $2.32 to $57.73, and Alkermes added 76 cents to $20.65.

* Some big telecom shares rallied. BellSouth rose $1.15 to $33.25, and Verizon Communications gained $1.15 to $44.65. The stocks have bounced sharply after diving in April.

* Major brokerage stocks were broadly lower. Merrill Lynch fell 65 cents to $42.30, Goldman Sachs dropped $1.29 to $76.90, and Morgan Stanley slid $1.27 to $46.66.

Market Roundup, C6-7