Aversion to Stocks Hits Nearly Every Sector

Nowhere (almost) to hide.

That has become the dominant theme on Wall Street as the selling has mushroomed over the last eight weeks.

On Friday, stocks tumbled across the board on record trading volume, but the biggest losers weren’t technology shares--the sector that has borne the brunt of the bear market’s wrath since March 2000.

Although the tech-dominated Nasdaq composite index fell 37.80 points, or 2.8%, to 1,319.15 Friday, its losses were far exceeded by the blue-chip Dow Jones industrials, which sank 390.23 points, or 4.6%, to 8,019.26, and the broader Standard & Poor’s 500, which slid 33.81 points, or 3.8%, to 847.75.

As the fear factor soared on Wall Street, many investors rushed into Treasury securities and into gold.

“The mood is just horrible,” said Mike Driscoll, a trader at brokerage Bear Stearns. “Anything people can point to as a negative they are jumping all over it.”

Investors also bailed out in Europe, driving key share indexes down 5% or more there.

In recent weeks, U.S. investors’ dislike of stocks has broadened to include nearly every major industry sector. This week, all but three of 123 S&P; 500 industry groups declined.

“Money managers are getting calls saying, ‘Just liquidate my holdings. Raise cash,’ ” said Will Muggia, manager of the Touchstone Emerging Growth Fund. “Part of the fear is that there’s no place to hide.”

On Friday, the drug sector was rocked by news that federal regulators are probing allegations of fraudulent record-keeping at Johnson & Johnson’s Puerto Rico plant, which makes an anemia drug that is one of the firm’s bestsellers.

J&J;, a Dow stock, dived $7.88 to $41.85.

Other industry groups leading Friday’s decline included engineering companies, soft-drink makers and gas utilities.

The Dow has fallen every session but one in the last two weeks, losing 14% in all, as more investors question the outlook for company profits amid widening corporate financial scandals.

Since the Fourth of July, about $1.5 trillion in investor wealth has evaporated from the stock market, based on the Wilshire 5,000 index.

Despite some upbeat second-quarter corporate earnings reports this week, many investors are focusing on iffy prospects for earnings growth in the second half of the year. Ninety-three companies in the S&P; 500 have said third-quarter earnings would be lower than forecast, according to Thomson First Call. That’s more than twice the 40 that have said they would surpass estimates.

What’s more, the wave of alleged corporate improprieties shows no sign of cresting.

On Friday, DaimlerChrysler tumbled $3.90 to $43.65 after saying the Justice Department is conducting a criminal probe into allegations of price-fixing by Mercedes-Benz dealers.

Also, gas utility Nicor plunged $15.26, or 40%, to $22.75. The firm said it found differences between estimates of natural gas sales and actual revenue at a joint venture with Dynegy, an energy trader.

Overall, losers swamped winners Friday by 25 to 8 on the New York Stock Exchange, and total trading volume topped 3 billion shares, the highest ever.

On Nasdaq losers topped winners by 25 to 10. Volume exceeded 2.4 billion shares.

For the week, the Dow was down 7.7%, Nasdaq slumped 4%, and the S&P; 500 slid 8%.

“No matter what I think the market goes down,” said Alan Hoffman, who manages $1 billion at Value Line Asset Management. “It’s god-awful psychological black death out there. I don’t have any projections or investment advice.”

PepsiCo fell $4.10 to $36.20. The second-largest soft-drink producer said second-quarter profit and sales at its Frito-Lay unit rose less than forecast. Declining Tropicana juice sales also hurt revenue.

In the tech sector, Sun Microsystems sank $1.55 to $4.25. The maker of computer servers said that fiscal 2003 earnings would be less than analysts predicted and that it would have a slight loss this quarter.

Markets also plunged in Europe on fears that Wall Street could drag the U.S. economy down with it, halting the global recovery. Also, the dollar’s steep decline in recent weeks is raising pricing problems for European exporters.

The main German stock index fell 5.1% on Friday, while the British index lost 4.6%.

“It will take years for people to feel confident again,” said Andy Nigg, money manager at Vontobel Asset Management in Zurich. “Anyone who isn’t concerned is living in La-La Land.”

But the dollar stabilized Friday, which surprised some traders who expected it to slide anew with U.S. stocks’ decline.

Many investors rushed into Treasury securities, seeking safe haven. The yield on the 10-year T-note fell to 4.52% from 4.61% on Thursday. Shorter-term yields also slid.

In commodities markets, near-term gold futures jumped $6.90 to $323.90 an ounce. But gold remains below its recent high of $327.80.

Reuters and Bloomberg News were used in compiling this report.

Market Roundup, C5-6