US stocks decline

Stocks sank on Wall Street today as strong economic numbers were eclipsed by mixed corporate results, including disappointing earnings from JP Morgan Chase.

Overall, earnings have come in somewhat better than expected, but the market’s reaction to good news has been muted at best.

Some analysts attributed this to growing anxiety over the prospect of higher interest rates.

And while economic numbers have been solid, the fact that inflation rose during 2004 at the fastest pace in four years only exacerbated rate concerns.

“I think the market is suffering from the fears of a possible hawkish Federal Reserve going forward,” said Peter Cardillo, chief strategist at SW Bach & Co, who noted that other worries have also been injected into the market, including high oil prices ahead of what could be a problematic election in Iraq on January 30. “There are several fear factors overshadowing the earnings season.”

The Dow Jones industrial average fell 88.82, or 0.84%, to 10,539.97.

The broader gauges also fell. The Standard & Poor’s 500 index slipped 11.35, or 0.95%, to 1,184.63. The Nasdaq composite index lost 32.45, or 1.54%, to close at 2,073.59.

Inflation rose at the fastest pace since 2000 last year as a surge in fuel bills sent the Consumer Price Index climbing 3.3%, the Labour Department reported.

Consumer prices rose just 1.9% in 2003. There could be some relief ahead, however; lower energy prices in December led to a 0.1% drop in retail prices.

Economists hope that 2005 will turn out to be a calmer year on the energy front.

In other economic news, the Commerce Department reported residential construction rose for a fourth straight year following a jump in construction of new homes in December.

Separately, the Labour Department announced new claims for unemployment benefits fell last week by the largest amount in more than three years, easing concerns raised by layoffs over the previous two weeks.

For most investors, the focus was on earnings, which were just not good enough to inspire buyers. One of the biggest let-downs came from JP Morgan Chase, which missed estimates, causing the entire banking sector to sag.

“I think generally people were expecting that we would have decent numbers from JP Morgan,” said Som Dasgupta, managing director of trading at PNC Bank in Pittsburgh. “Nobody was expecting their profits to fall.”

JP Morgan Chase shed 56 cents to 37.84 after saying its profits had fallen 11% in the fourth quarter. The bank blamed some of the shortfall on costs associated with the recent merger with Bank One, which was completed last July.

The world’s biggest vehicle manufacturer, General Motors, dropped 6 cents to 36.71 after reporting lower profits compared to a year ago, due in part to continuing struggles at its European operations.

Pfizer, the world’s largest drug company, declined 42 cents to 24.88 after reporting its net income more than quadrupled during the fourth quarter, driven by strong sales of cholesterol drug Lipitor. Earnings still missed analysts’ forecasts after charges.

International Business Machines, which announced profits that beat expectations after the close of trade yesterday, was down 1.80 at 93.10. Revenues also topped forecasts, as IBM posted strong overseas sales on the back of a weak dollar. IBM’s outlook for 2005 was positive, but company officials said pension costs would be higher than expected due to the currency impact.

On the Nasdaq market, Yahoo was down 73 cents at 36.45 after the company nearly tripled its fourth-quarter profits thanks to brisk online advertising. Both earnings and revenues topped Wall Street expectations, and executives raised the company’s outlook for 2005.

The Russell 2000 index, which tracks smaller company stocks, was down 6.96, or 1.11%, at 617.91.

Decliners outnumbered advancing issues by nearly 2 to 1 on the New York Stock Exchange.