Indexes Hit New Lows for the Year
Stocks slumped Tuesday, wiping out an earlier rally and sending the three major U.S. indexes to new lows for the year as more bad news slammed the drug and biotechnology sectors.
“After that patriotic, almost defiant rally in the fourth quarter and earlier this year, reality is setting in,” said Chris Orndorff, head of equities at Payden & Rygel in Los Angeles. “People are starting to realize that the economy is not going to bounce back so strongly, and they are adjusting their expectations down to a more realistic level.”
The tech-heavy Nasdaq composite index finished below 1,500 for the first time since Oct. 2, sinking 33.51 points, or 2.2%, to 1,497.18. The Dow Jones industrial average closed at its lowest since November, sliding 128.14 points, or 1.3%, to 9,517.26. The broader Standard & Poor’s 500 index lost 1.7%, falling 17.14 points to 1,013.60, and is at lows not seen since Sept. 26.
More than three stocks fell for every two that rose on the New York Stock Exchange and Nasdaq. Trading was active.
Analysts say terrorism fears, corporate accounting scandals and sluggish earnings have kept buyers on the sidelines. Tuesday’s reversal coincided with another suicide bombing attack in Israel.
For the year, Nasdaq is down 23.2%; the S&P; is off 11.7%; and the Dow, benefiting from its lower tech weighting, is down 5%. Smaller stocks generally have held up better than the big indexes, but Tuesday’s losses knocked S&P;’s small- and mid-cap indexes into the red year to date.
Several large drug makers paced Tuesday’s broad sell-off.
Abbott Labs dived $7.37 to $38.30 after cutting its 2002 profit forecast. Abbott will take a one-time charge related to quality- control problems at a plant and said sales of an anti-obesity drug have been disappointing.
Merck sank $2.42 to $51.88 after saying it will wait until next year to resubmit its application to the Food and Drug Administration for approval of an arthritis drug. U.S.-traded shares of GlaxoSmithKline lost $1.89 to $39.12 on reports that litigation might be needed to resolve a dispute with the Internal Revenue Service.
IDEC Pharmaceuticals lost $6.34 to $32.03 on news that Medicare won’t cover its cancer drug Zevalin until October. Genentech dropped $2.85 to $31.55 a day after jurors decided that it broke a gene research contract and owes City of Hope $300 million in royalties. The verdict prompted “more confusion about intellectual property rights” in the sector, Orndorff said.
On the day, the Amex biotech index plunged 8.1%.
In other market news:
* Some telecom firms bucked the down trend after issuing positive earnings forecasts. Nokia’s U.S. shares rallied 55 cents to $12.55, and Nextel Communications rose 63 cents to $4.42 after both said they would meet targets.
* But phone company AT&T;, the worst performer among the Dow industrials during the last decade, fell 52 cents to $10.39 after selling new stock to raise $2.52 billion. It was the stock’s lowest close since January 1991.
* Brokerage stocks sagged as New York Atty. Gen. Eliot Spitzer, who is investigating Morgan Stanley Dean Witter and Salomon Smith Barney, said he was finding conflicts of interest at firms other than Merrill Lynch, which reached a $100-million settlement with Spitzer in May. Morgan Stanley dropped $1.76 to $43.20 and Salomon’s parent, Citigroup, fell 99 cents to $40.71.
* Oil prices ebbed to their lowest in eight weeks as industry figures showed supplies holding at comfortable levels for summer vacation drivers. July crude settled 17 cents lower at $24.12 a barrel in New York trading, down 18% from eight-month highs near $30 a barrel in mid-May.
* Energy stocks followed crude prices lower. Oil-field services giant Schlumberger fell $1.38 to $46.87, and drilling servicer Baker Hughes lost $1.46 to $33.48.
* Xerox dropped 46 cents to $7.86 after Standard & Poor’s lowered the company’s debt rating to BB-minus from BB on concerns about debt and cash flow.
* Italian car maker Fiat rose 50 cents to $13 in New York trading the day after its chief executive resigned.
* Treasury yields eased as some investors sought the relative safety of government bonds. The yield on the benchmark 10-year note fell to 4.97% from 5.03% on Monday.
* Among tech stocks, Intel lost 85 cents to $20.22, PMC-Sierra skidded $1.80 to $10.84, Ciena dropped 35 cents to $4.62, and EMC fell 24 cents to $6.98.
Market Roundup, C8-9
