A broad-based sell-off slashed stock prices on Thursday, as a fresh batch of disappointing earnings projections pushed more investors to the exits.
The Dow industrial average closed off 83.11 points, or 1.5%, to 5,520.54, although the blue-chip index fought back from a loss of 133 points at midday.
The Nasdaq composite index of mostly smaller stocks plunged 34.83 points, or 3.1%, to 1,106.36. It had been off 4%. The point drop was the index's third-largest ever.
Volume was a heavy 520 million shares on the New York Stock Exchange, where losers swamped winners by 20 to 5.
Although various market "circuit breakers" designed to slow stocks' slide were triggered Thursday, sellers still overwhelmed the market--just as they did a week ago today, when the Dow sank 115 points as bond yields soared.
On Thursday, the catalysts for the latest rout were downbeat earnings projections from two big companies: tech giant Hewlett-Packard and health-maintenance organization United Healthcare.
Hewlett said sales have suddenly slowed, threatening its earnings growth. United Healthcare warned that second-quarter earnings will be well below year-ago results because of higher costs of providing health-care services.
"The reports paint an awfully dim picture for second-quarter profits," said Tim Grazioso, manager of Nasdaq trading at Cantor Fitzgerald Securities Corp.
Other analysts disagreed, noting that many companies are in fact reporting higher earnings. Upbeat reports on Thursday included those from J.P. Morgan and Federal National Mortgage.
But investors were in a mood to sell from the get-go Thursday, traders said.
Some say the market has simply run out of steam, and faces too many obstacles now: Higher interest rates, heavy selling by corporate insiders, and slowing inflows into mutual funds.
"People are saying thing can't get better and it's better to sell now," said William Schneider, a trader at Salomon Bros.
There was good news Thursday from the bond market, however: Yields continued to slide, with the 30-year Treasury bond yield dipping to 7.05% from 7.07% Wednesday. But some bond traders said bonds were merely benefiting from Wall Street's sell-off, as money exited stocks for bonds.
Also, the dollar remained strong, suggesting no major selling of U.S. assets by foreign investors.
But investors are clearly spooked by the long string of downbeat corporate earnings warnings in recent weeks.
"The earnings disappointments [have] really upset the cart," said Bob Dickey, managing director at Dain Bosworth in Minneapolis.
Moreover, market technicians say stocks' fast fall in recent week has broken a number of important technical barriers, suggesting further selling ahead. "We have not reached an oversold position yet," said Eugene Peroni, analyst at Janney Montgomery in Philadelphia. "I don't see any bullish signs."
Analysts said the Nasdaq market, in particular, remained vulnerable even though the Nasdaq composite index is already off 11.4% from its early-June peak.
"I think the Nasdaq is going to be on the outside looking in for a number of months," said Dennis Jarrett of Jarrett Investment Research.
Among Thursday's highlights:
* Hewlett-Packard's earnings warning drove it down 10 5/8 to 78 3/8 and caused heavy selling through the tech sector. (See chart, D1.)
* United Healthcare tumbled 13 1/4, or about 30%, to 31, after its warning. Other HMOs falling sharply included PacifiCare Health class A, down 4 1/8 to 66; Aetna Life, down 4 1/8 to 61 1/8; Foundation Health, off 1 7/8 to 29 1/2; and FHP International, down 2 7/16 to 25 1/16.
* Eastman Kodak plunged 5 1/8 to 70 3/8, badly wounding the Dow, after Prudential Securities downgraded the stock, warning that the company's film sales appear to have slowed in recent months.
* Retailers were generally lower even though some reported decent June sales. Wal-Mart fell 3/8 to 23 5/8 and Ann Taylor sank 2 5/8 to 13 7/8.
* Despite their strong earnings reports, J.P. Morgan fell 5/8 to 82 3/8 and Federal National Mortgage sank 1 to 30 3/4. Among other financial issues, First Chicago NBD fell 1 1/4 to 38 1/4, Citicorp dropped 2 1/4 to 76 1/4 and Merrill Lynch lost 2 3/4 to 57 1/4.
* Among the day's few winners, some energy stocks were higher as oil prices rose. Exxon added 1/2 to 89 3/8, Schlumberger rose 1 to 88 1/8 and Chevron rose 5/8 to 60 3/8.
* Gold stocks, usually beneficiaries of market turmoil, were losers Thursday. Placer Dome fell 1/2 to 24 3/4 and Newmont Gold lost 1 1/8 to 53.
Gold futures, however, gained as some buyers fleeing the stock market turned to hard assets. On the New York Mercantile Exchange, August gold futures closed up $1.40 at $384.00 an ounce.
In foreign trading, Mexican shares followed the U.S. market down, but not to the same degree. The Bolsa index fell 1%. And in Brazil shares bucked the U.S. decline, with the Bovespa index rising 1%.
In commodities trading, grain prices soared again at the Chicago Board of Trade as concern about weather damage to U.S. corn and soybeans sparked panic buying among traders already concerned about the lowest world grain stocks in decades.
Market Roundup, D6