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Stocks sink on mixed earnings reports

Associated Press

Stocks sank Wednesday as strong economic numbers were eclipsed by mixed corporate results, including disappointing earnings from JPMorgan Chase & Co.

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 S.W. Bach & Co., who noted that other worries have also been baked into the market, including lofty oil prices ahead of what could be a problematic election in Iraq on Jan. 30. “There are several fear factors overshadowing the earnings season.”

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

The broader gauges also fell. The Standard & Poor’s 500 index slipped 11.35, or 0.95 percent, to 1,184.63. The Nasdaq composite index lost 32.45, or 1.54 percent, to 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 percent, the Labor Department reported. Consumer prices rose just 1.9 percent in 2003. There could be some relief ahead, however; lower energy prices in December led to a 0.1 percent 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 Labor 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 JPMorgan Chase & Co., which missed estimates, causing the entire banking sector to sag.

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

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

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

Overseas, Japan’s Nikkei stock average shed 0.16 percent. In Europe, France’s CAC-40 lost 0.16 percent, Britain’s FTSE 100 fell 0.12 percent and Germany’s DAX index was down 0.12 percent.