US stocks plunge

Fears over a lack of job growth and a sluggish US economy sent stocks sharply lower today, with the Nasdaq composite index wiping out its gains for all of 2004 and the Dow Jones industrial average nearly following suit.

With the first quarter ending this month, companies such as Nike and Texas Instruments have issued surprisingly strong earnings outlooks. But with job creation stagnant and some analysts believing stocks are overpriced, investors feared the market’s year-long rally might have ended.

“When good news doesn’t move the market higher, we’re obviously in a corrective phase,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “The glass is half-empty right now, but I do believe that will switch back to half-full again when earnings go out in April.”

The Nasdaq lost 13.62, or 0.7%, to close at 1,995.16, after falling 38.85 on Monday. The Nasdaq, home to many of the technology stocks that fuelled last year’s rally, closed below its low for the year of 2,003.37 and posted its lowest close since December 26.

The Dow lost 72.52, or 0.7%, to close at 10,456.96, adding to Monday’s loss of 66.07. The Dow was off 280.74 from its 2004 high, set on February 11, and fell below its 2003 closing level of 10,453.92 in afternoon trading before a slight session-ending rally.

It was the Dow’s lowest close since January 13.

The Standard & Poor’s 500 index fell 6.63, or 0.6%, to 1,140.58, having fallen 9.66 on Monday.

After peaking three weeks ago, stocks have fallen amid investors’ growing discomfort with the economy and a sense that businesses are not creating enough jobs to give the recovery much momentum going forward.

Last Friday’s disappointing jobs report from the government only added to Wall Street’s frustration.

But many analysts were not surprised by the market’s recent downturn, believing stocks were due for a correction after their runup over the past year.

Texas Instruments said its quarterly profits would come in at the high end of previous forecasts. Shares fell 34 cents to 30.26.

Sportswear maker Nike jumped 2.17 to 76.66 after stating it would easily beat Wall Street estimates for the current quarter.

There was also another merger in the financial sector. Sovereign Bancorp lost 29 cents to 21.75 after it announced it would acquire Waypoint Financial Corp for 980 million. Waypoint gained 2.72 to close at 27.48.

Grocery store chains Albertson’s and Kroger reported faltering earnings due to the 4 1/2-month grocery store worker strike in California, which ended last month.

Albertson’s, down 21 cents at 23.91, saw profits fall 40% for the quarter, while Kroger lost 337.4 million for the quarter and fell 35 cents to 18.56.

Sun Microsystems shed 33 cents to 4.33 after it was downgraded to a “neutral” rating by Banc of America Securities due to concerns over the long-term stability of the company’s Unix business.

The struggling computer and software maker had its debt rating cut to junk status on Friday.

Declining issues outnumbered advancers by a 9-to-5 ratio on the New York Stock Exchange, where volume totalled 1.48 billion shares, compared to 1.26 billion on Monday.

The Russell 2000 index of smaller companies was down 6.56, or 1.1%, at 585.95.