Stocks Sink Again as Frustration Continues

Wall Street’s anger and disappointment over the Federal Reserve’s latest interest rate cut failed to subside Wednesday, leaving stocks broadly lower.

The Dow Jones industrial average joined other key indexes at a two-year low, tumbling 233.76 points, or 2.4%, to 9,487.00.

Most other indexes posted smaller declines, including the battered Nasdaq composite index, which fell 27.21 points, or 1.5%, to 1,830.23. But sellers were clearly in control: Falling stocks outnumbered gainers by 2 to 1 on Nasdaq and on the New York Stock Exchange, in heavy trading.

“Just as there seemed to be no end in sight on the upside a year ago, the market is equally dismal right now,” said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara. “Positive sentiment feeds on itself; negative sentiment feeds on itself.”

Amid increasingly bearish projections for corporate earnings as the economy struggles, many investors had been hoping that the Fed would announce a deep cut Tuesday in its benchmark short-term interest rate.

Instead, the central bank opted for a half-point cut, the same size cut it made Jan. 3 and Jan. 31. That left the Fed’s target for the federal funds rate, the overnight loan rate among banks, at 5%.

The market had been in a modest rally before Tuesday’s Fed announcement, which came at midday. When the news hit, stocks immediately spiraled lower, and the Dow finished Tuesday with a loss of 238.85 points, or 2.4%, while Nasdaq plunged 4.8%.

So far this week the Dow has lost a net 336 points, after diving 821 points last week. At Wednesday’s close the Dow was at its lowest since March 4, 1999.

The Dow’s drop from its record high a year ago now stands at 19.1%--nearing the 20% threshold that traditionally marks a bear market.

But the 30-stock index is coming late to that party: Broader indexes including the Standard & Poor’s 500, the Wilshire 5,000 and the Nasdaq composite already are deep into bear territory for the first time since at least 1990.

“The stock market is reflecting the corporate outlook,” said Michael Holland, chairman of money manager Holland & Co. Investors are “looking out six to 12 months and reflecting what they’re hearing from” companies, he said. “They can’t see anything good yet.”

Earnings warnings from companies continue to pile up. On Wednesday, farm machinery giant Deere & Co. issued a gloomy forecast, driving its shares down $2.16, or 5.4%, to $38.17.

And consumer product titan Procter & Gamble Co. slumped $2.70 to $63.20 amid expectations that it will announce massive job cuts.

Investors appeared to be selling on any excuse and targeting shares that until recently had held up well--such as Boeing and Johnson & Johnson.

Boeing lost $1.15 to $53.85 after saying it will move its headquarters from Seattle. J&J; sank $3.57 to $87.23, leading a broad decline in the drug sector.

The dumping of blue chips in recent sessions has encouraged some analysts: Optimists argue that, when investors sell their most cherished and relatively “safe” stocks, it’s a sign the bear market is nearing its end.

However, other analysts believe that the weakness in blue chips means the economy has slowed more than thought and that investors aren’t finished selling.

“I’m not sure there has been capitulation yet,” said Dan Ascani, research director at Global Market Strategists. “There are still too many people left over from the bull market who have held on.”

Besides the Fed, the latest economic news also weighed on the market: Consumer price inflation in February, reported Wednesday, was higher than expected. That helped push long-term Treasury bond yields up slightly.

Among Wednesday’s highlights:

* Blue chips down sharply included American Express, off $2.28 to $34.99; Coca-Cola, down $2.18 to $45.25; and General Motors, down $1.67 to $53.52.

* Drug stocks were hard hit, including Merck, off $2.29 to $67.96, and Eli Lilly, down $2.28 to $74.22.

The biotech group was hammered. Amgen plunged $5.88 to $55.44 on concern that first-quarter sales of Neupogen, the company’s second-biggest drug, won’t be as strong as expected and that some sales forecasts for the anemia drug Aranesp are too high.

* Major natural gas shares, big winners over the last year, suffered heavy selling. Enron dived $5.06 to $55.89, El Paso dropped $3.92 to $65.70 and EOG Resources slid $2.60 to $44.10.

* Some beaten-down tech shares rallied, if modestly. Intel gained 94 cents to $25.56 after sliding Tuesday to a two-year low. IBM added 78 cents to $89.08, Sun Microsystems rose $1 to $18.38 and Applied Materials rose $2.06 to $44.88.

But Microsoft fell $2.63 to $50.06 and EBay slumped $3.19 to $32.13.

* Shares of major home builders gained after two firms, KB Home and Lennar, reported strong earnings. KB Home surged $1.25 to $29, Lennar jumped $1.29 to $39.04 and Ryland gained 46 cents to $38.66.

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Market Roundup: C6

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Unbearable?

The Dow Jones industrial average is down 19.1% from its all-time high. A 20% decline would officially put the benchmark average into a bear market, joining broader indexes already there.

Dow industrials: -19.1%

S&P; 500: -26.5%

Wilshire 5,000: -30.1%

Nasdaq composite: -63.7%

Source: Bloomberg News