Losses Continue as Quarter Ends
Stocks ended the third quarter with a thud Monday as major indexes closed out their worst quarterly performance since 1987. Investors ran for cover after reduced retail sales forecasts and weak manufacturing data fanned fears about corporate profits.
The selling, especially intense in the first hour of trading, helped drive major European indexes to multiyear lows.
“People are tremendously disillusioned with the current news, and they don’t see any real catalyst” for higher stock prices, said Philip Dow, director of equity strategy at RBC Dain Rauscher. “It’s a very difficult time.”
How bad is it? The Wilshire 5,000 total market index, the broadest measure of the U.S. stock market, fell 17% in the July-to-September quarter, erasing about $1.9 trillion in market value, according to Wilshire Associates, which calculates the market gauge. That represents about $7,000 for each U.S. citizen.
On Monday, the Dow Jones industrial average, off 240 points in the early going, closed down 109.52 points, or 1.4%, at 7,591.93. The loss came on the heels of Friday’s 295-point swoon and marked the Dow’s lowest close since August 1998.
The tech-laden Nasdaq composite index slid 27.10 points, or 2.3%, to 1,172.06--its lowest close since September 1996. The Standard & Poor’s 500 index fell 12.09 points, or 1.5%, to 815.28. The S&P; 500 remains above the multiyear low of 797.70 it reached July 23.
Losers beat winners by 6 to 5 on the New York Stock Exchange and on Nasdaq in active trading.
September has been the worst month for stock performance over the last half century, and it lived up to that reputation this year. For the month, the Dow sank more than 12%, Nasdaq fell almost 11% and the S&P; 500 slid 11%--its biggest one-month decline since tumbling 14.6% in August 1998.
For the quarter, the Dow lost 17.9%, Nasdaq 20% and the S&P; 17.6%. It was the biggest quarterly decline for the Dow and the S&P; since the fourth quarter of 1987, when the stock market suffered its last major crash.
“The real problem is sentiment,” said Brian Pears, head of equity trading at Victory Capital Management. “With every earnings cut and every soft economic number ... people are starting to price in a worst-case scenario. People are getting nervous.”
An already sluggish climate took a turn for the worse when major retailers scaled back sales forecasts Monday. Wal-Mart Stores, the world’s biggest retailer, fell $2 to $49.24 after ratcheting back its September sales forecast.
And after the market closed, Target, another major discount retailer, said its September sales would fall short of forecasts.
Meanwhile, the government reported that growth in consumer spending and personal income fell short of expectations in August. And the Purchasing Management Assn. of Chicago reported that its index of area business activity fell to 48.1 in September. A reading below 50 indicates that business is contracting; this was the first such reading in seven months.
The Chicago index is considered an indicator of the national purchasing managers report, to be issued Wednesday.
The labor dispute at the Los Angeles port also is a potential threat to the U.S. economy if it isn’t resolved quickly, analysts said.
The news of economic weakness and falling stock prices once again drove investors to the haven of Treasury securities. The yield on the benchmark 10-year Treasury note slipped to 3.6% from Friday’s close of 3.66%. Gold, another haven from volatile markets, rebounded from recent losses, gaining $4.20 to $323.90 an ounce in New York trading.
In Europe, the sell-off was broadly based--only 35 of 300 top-listed companies managed a gain.
Key indexes fell 4.8% in Britain, 5.9% in France and 5.1% in Germany. The FTSE Eurotop 300 index closed down 4.8%. The index lost 14.5% in the third quarter and is down 46.7% this year.
Insurers and banks were the worst hit among European firms on concern about the crumbling value of their stock portfolios.
In Japan, stocks fell 2% in early trading today.
In other highlights:
* Intel dropped 73 cents to $13.89. The chip-making giant’s chief executive again said a turnaround in the computer industry would not come until corporate profits rebound. The SOX index of semiconductor stocks lost 3.4%.
* Other technology heavyweights also slumped. Cisco Systems fell 75 cents to $10.48, Microsoft dropped $1.51 to $43.74, and Oracle lost 54 cents to $7.86.
* McDonald’s fell 71 cents to $17.66. Moody’s Investors Service cut its outlook for the company’s debt to “negative” from “stable,” saying McDonald’s earnings may fall as competition rises.
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Market Roundup, C7-8
