Stocks Drop Again as Investors’ Worries Rise
Stocks slid for a second day Tuesday as dismal consumer confidence numbers, a spate of earnings disappointments and the government’s latest terrorism warning fueled further profit-taking.
The Dow Jones industrial average fell 147.52 points, or 1.6%, to 9,121.98, after dropping 275.67 points Monday. The Nasdaq composite index lost 32.11 points, or 1.9%, to 1,667.41, after sliding 69.44 points Monday. The Standard & Poor’s 500 index fell 1.7%.
Losers swamped winners by 2 to 1 on Nasdaq and by 7 to 3 on the New York Stock Exchange amid active trading.
The Nasdaq had been off as much as 3% at one point Tuesday. Many analysts said profit-taking was overdue after the extended rally since Sept. 24.
But the question looms: Could this be the start of a new sell-off that will take back most or all of the gains the market made after the attacks?
Wall Street veterans said the biggest unknown remains the risk of another terrorist attack--and how investors would react.
“I’m not convinced that the market is headed back toward its lows, but we’re seeing how quickly and sharply the psychology of the consumer is being affected by this war against terrorism,” said Stuart Freeman, chief equity strategist at brokerage A.G. Edwards in St. Louis. “The market never does well in uncertainty, and we have plenty of that now, with the government saying, ‘Brace yourself for something else.”’
After surging 24.8% from a Sept.21 low, the Nasdaq has slid 6.1% in three sessions. After climbing 15.9%, the Dow has given back 4.4% this week.
The economic data don’t support a rally, some analysts say, and neither do corporate earnings. According to data tracker Thomson Financial/First Call, brokerage analysts expect overall third-quarter profit for S&P; 500 companies to drop 21.7% from a year earlier.
The Conference Board said Tuesday its consumer confidence index plunged to a 71/2-year low in October, a steeper drop than expected.
Though Freeman thinks stocks could bounce around in a “trading range” over the next couple of months as the terrorism conflict unfolds, the market’s longer-range prospects still look strong, he said.
“The economic recovery has been put off a couple of quarters, so we may not see year-over-year profit growth [in the S&P; 500] until the second quarter of 2002,” he said. “But investors who diversify among a broad swath of industry leaders will be rewarded.”
Some analysts said the market was due for a breather this week after its brisk run.
“It kind of got overdone on the up side, so this could be time for a pause,” said Chip Hanlon, president of Huntington Beach-based investment advisory firm Unfunds Inc.
Hanlon said the worst may be over for the hard-hit technology sector but that some financial stocks, especially consumer lenders, could face tough times in a recession. He said the troubles of credit card provider Providian Financial may be looked back upon “not as an anomaly but as a canary in a mine shaft.”
Among Dow stocks, McDonald’s lost $1.29 to $25.99 after lowering earnings guidance for next year. Philip Morris sank $1.98 to $47.70 after Goldman Sachs dumped the stock from its recommended list, citing concerns over profit growth.
Elsewhere, drugstore chain CVS tumbled $7.27 to $24.35 after announcing a 16% drop in third-quarter earnings and plans to shut 200 stores. Qualcomm slumped $3.61 to $48.69 after a Credit Suisse First Boston analyst said revenue expectations are too rosy.
Among the other highlights:
* Earnings warnings clipped a variety of stocks, including oil and gas equipment maker Cooper Cameron, down $2.78 to $39.90; software maker Openwave Systems, down $1.18 to $7.81; and local-phone giant Verizon Communications, down 89 cents to $49.30.
* The latest consumer data hurt retailers, including J.C. Penney, down $2.03 to $21.27; and Kmart, down 47 cents to $5.74.
* Some stocks got a lift from upbeat profit news. Procter & Gamble rallied $2.90 to $74.20 after beating forecasts for its latest quarter. Royal Caribbean Cruises rose $1.28 to $10.43 after posting a narrower-than-anticipated loss.
* Anthem, a health insurance company that went public Monday at $36 a share, jumped to $40.90 on its first trading day.
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Market Roundup, C8, C9
