Untitled Document

Search by:

Chicago Tribune Bill Barnhart Column
Source: Chicago Tribune
Publication date: 2004-03-25
Arrival time: 2004-03-24

Mar. 25--SMALL-COMPANY STOCKS JOIN BIGGER SIBLINGS IN DOWNHILL MARCH: The stock market's malaise added a new victim Wednesday.
During the trading session, the Russell 2000 index of small-company stocks dipped into negative territory for the year.

Small-cap stocks were big winners last year. The Russell 2000, which is the benchmark for many active equity fund managers, gained 47 percent in 2003.

By comparison, the Dow Jones industrial average of 30 giant companies climbed 28 percent last year.

Both were respectable gains, bouncing off tough times in the previous three years.

But the story of 2003 was the strength of small-company stocks as forerunners of an economic recovery.

Now investors are concerned that the small-cap rally ran far ahead of good times that have yet to materialize in many parts of the economy.

As one indicator of the current state of caution, the more speculative growth stocks in the Russell 2000 have trailed the more conservative small-cap value stocks so far this year -- the opposite of last year's results.

WEDNESDAY'S ACTION: Stocks closed mixed, as technology stocks ended a four-day losing streak but broader indexes continued to slump.

The Dow Jones industrial average fell 15.41, to 10,048.23. Losses by Merck, Alcoa and Exxon Mobil offset gains by Caterpillar, DuPont and International Business Machines.

The broader Standard & Poor's 500 index slipped 2.62, to 1091.33. The Nasdaq composite index added 7.68, to 1909.48. The Russell 2000 fell 3.29, to 557.63, but during the session it reached a new low for the year, 556.13.

"So far, this is a standard correction," said Chicago money manager Carl Birkelbach. "The only thing that is still holding is the Dow Jones above 10,000."

In recent days, world financial markets have responded to terrorism fears. On Wednesday, officials in France found a bomb on the tracks of a state-run railway.

But a survey of business economists found that poor job growth and federal deficits were the major concerns, ahead of terrorism.

"The major economic risk has now moved to job growth and the deficit, rather than terrorism," said Duncan Meldrum, president of the National Association for Business Economics, in a statement released with the survey.

New York Stock Exchange trading volume was 1.49 billion shares. Losers outnumbered winners by nearly a 2-1 ratio among NYSE-listed issues.

Nasdaq volume totaled 1.77 billion shares, as losers held a narrow lead over winners.

The government's monthly auction of 2-year notes brought a yield of 1.52 percent.

Gold for April delivery lost $2.60 an ounce, to $417.40, in New York futures trading.

Oil prices eased, reflecting a report of greater oil inventories in the U.S. Crude oil for May delivery dropped 44 cents a barrel, to $37.01.

FED SPEAK: Treasury securities closed lower, after Jack Guynn, president of the Federal Reserve Bank of Atlanta, warned that interest rates eventually will follow economic growth higher.

Traders will contend Thursday with public remarks by several other Federal Reserve officials. In recent days, the comments have been mixed.

On Monday, Alfred Broaddus, president of the Federal Reserve Bank of Richmond, told Reuters that the economy still has not expanded sufficiently to force the Fed to worry about raising interest rates.

"I think the expansion is going to continue. It will just take longer for it to gain momentum," he said.

Guynn was more hawkish on interest rates in remarks Wednesday: "I don't want businesses to build their plans on expectations of a continuation of accommodative monetary policy without regard to prospective economic conditions."

By way of example, Guynn cited his son, Mike, a real estate developer who has prospered under 45-year-low interest rates. "I think, at least I hope, Mike understands that as rates move back to more typical levels at some point, some of his business may be vulnerable--that part induced by temporary low rates alone."

Presidents of the Federal Reserve banks in New York and St. Louis are scheduled to give speeches Thursday.

-----

To see more of the Chicago Tribune, or to subscribe to the newspaper, go to http://www.chicago.tribune.com/

MRK, AA, XOM, CAT, DD, IBM, 6680,

Publication date: 2004-03-25

By utilizing the content on this page, you agree to the legal terms.
Company MultiLinkTM
Find out more about these companies.
Exxon Mobil Corporation

contact us | subscriber services | site map | CNNmoney glossary
Copyright © 2001 CNN America, Inc. An AOL Time Warner Company ALL RIGHTS RESERVED.
Terms under which this service is provided to you. privacy policy

(Direct Link http://cnnfntech.yellowbrix.com/pages/cnnfntech/Story.nsp?story_id=48936545&ID=cnn)