Stock Indexes Fall Near Lows of Sept.
Wall Street suffered another mauling Tuesday, sending key stock indexes to within a hair’s breadth of their September lows and threatening to open a new phase of the long bear market.
What’s more, a stunning report after markets closed--that telecom giant WorldCom Group’s accounting was skewed by huge irregularities--could further dash investors’ confidence in corporate America and trigger heavy stock selling today, analysts warned.
The technology-dominated Nasdaq composite index Tuesday plunged 36.35 points, or 2.5%, to 1,423.99. The close left it less than a point above the three-year closing low of 1,423.19 set Sept. 21 in the aftermath of the Sept. 11 terrorist attacks.
The blue-chip Standard & Poor’s 500 lost 16.58 points Tuesday to end at 976.14, less than 11 points above its Sept. 21 low.
The Dow industrial average, though still well above its September low, sank 155 points, or 1.7%, to 9,126.82.
The market’s latest slide deepened what already are heavy losses this year for many investors, especially those who have hung on to the technology stars of the late 1990s. The Nasdaq index is down 27% since Dec. 31, after falling 39% in 2000 and 21% in 2001.
Computer chip leader Intel dropped $1.01 to $18.32 on Tuesday; Yahoo fell $1.36 to $13.72 and IBM slid $1.10 to $68.60.
More troubling was that the sell-off Tuesday included some of the stocks that have performed best over the last year--suggesting that investors are growing increasingly nervous even about shares that have bucked the continued downtrend in tech.
Among the day’s losers were Krispy Kreme Doughnuts, down $3.40 to $30.50; defense giant General Dynamics, down $4.88 to $103.13; auto parts retailer AutoZone, which slid $3.12 to $78.23; and tobacco and food titan Philip Morris, down $2.25 to $46.55.
Wall Street drew little cheer from an upbeat report from chemical company DuPont, which said its second-quarter earnings could be as much as 20% above analysts’ estimates. DuPont shares rose as high as $44.55 but fell back to close with a 13-cent gain at $43.24.
Overall, losers topped winners by 9 to 7 on the New York Stock Exchange and by 21 to 13 on Nasdaq, in heavy trading.
“Basically, what this is saying is people are scared,” said Robert Christian, chief investment officer for Wilmington Trust in Wilmington, Del.
The Conference Board said Tuesday that its index of consumer confidence fell sharply in June, dragged down partly by the stock market’s losses since mid-May. But many analysts said the economic recovery remains on track, and that what ails Wall Street has little to do with economic issues.
“There’s a big disconnect between what’s happening in the economy and what’s happening with the market,” said Art Hogan, chief market analyst at brokerage Jefferies & Co. in New York.
Many investors, he said, may be paying little attention to the economic news because of the barrage of corporate scandals and terrorism warnings, and the threat of a wider Mideast conflict.
“No matter what happens with the economy, until we stop worrying about ‘event risk,’ investors are saying they don’t want to get back in this game,” Hogan said. “There’s such a great lack of confidence” in stocks.
Another slide in the dollar’s value against the euro could trigger more selling of U.S. stocks by European investors, whose American investments are losing value with each drop in the dollar. The euro rose to 97.8 cents Tuesday from 97.1 cents Monday.
Some market pros said the selling Tuesday in such recent investor favorites as Krispy Kreme and AutoZone could be a sign that the market’s latest decline has nearly run its course.
“At the end of a down-wave they tend to sell the better-performing stocks,” said Kevin Marder, market strategist at Ladenburg Thalmann Asset Management.
But if the Nasdaq index and the S&P; 500 close below their Sept. 21 lows it could be another blow to fragile investor psychology, and will refire the debate over whether the bear market that began in March 2000 ended in September or has continued.
If the slide since March 2000 is viewed as continuous, it would now be 27 months old--the longest bear market since the 1940s.
Some analysts, however, said the powerful market rebound in the fourth quarter constituted a new bull market, because the S&P; 500 index rose more than 21% between Sept. 21 and early January.
But for investors who have held on to stocks for the last few years, whether this is a new bear market or the same old one may be a moot point. The net effect is the same: more red ink in stock portfolios.
Market Roundup, C6-7
