Dow Tumbles to 4-Year Low on More Bad News
The bear looks like it’s officially back in charge on Wall Street.
The most widely watched stock market index, the Dow Jones industrial average, tumbled Tuesday to close below its midsummer low, wiping out the last of the late July and early August rally that many investors hoped had marked the end of the market’s misery.
The blue-chip Dow led another broad decline in share prices in heavy trading as investors fled on concerns about the economy, corporate earnings and scandals, and U.S.-Iraq tensions.
As stocks fell, Treasury bond yields slid to new generational lows and gold prices gained.
The Federal Reserve’s decision to hold short-term interest rates steady may have helped add to Wall Street’s gloom in the final hours of trading, though the Fed’s inaction had been expected.
The Dow closed off 189.02 points, or 2.4%, at 7,683.13, its lowest finish since Oct. 1, 1998. The day’s slide pushed the index through the previous closing low of 7,702.34 set July 23.
The Standard & Poor’s 500 index fell 14.41 points, or 1.7%, to 819.29, holding above its five-year closing low of 797.70, also reached July 23.
The tech-dominated Nasdaq composite, which sank to a six-year low Monday, continued to fall Tuesday, but marginally. It closed down 2.76 points, or 0.2%, at 1,182.17 after sporting a gain for much of the session.
Falling stocks outnumbered winners by 21 to 12 on Nasdaq and by 23 to 10 on the Big Board.
The shaky state of the economy and the prospect of war with Iraq continue to dampen investors’ spirits, analysts said.
A weak consumer confidence report Tuesday raised new fears about the economy’s path.
“The market is coming to realize that the consumer is slowly but surely closing his purse strings,” said Kevin Marder, chief market strategist at Ladenburg Thalmann Asset Management in Los Angeles.
Marder said the slide in the Dow to new bear-market-low territory, joining the Nasdaq index at a fresh multiyear low, indicates that investor worries “are of a broad economic slowdown encompassing a vast array of industries, as opposed to the last couple of years, when it was more tech and telecom reacting to the slowdown in capital spending.”
Russ Koesterich, strategist at State Street Global Markets in Boston, said the Dow’s inability to hold on to the gains made in late July and early August deals another blow to investor psychology.
“Buying on the dips,” the winning strategy of the 1990s, has been a failed one since the market decline began in March 2000. Yet many analysts had high hopes that the July lows marked the end of the long bear market.
With the Dow at a new low, “For the average investor, it brings to the forefront the problems in the equity market,” Koesterich said. He said the latest slump raises the specter of more redemptions from stock mutual funds, which had four straight months of net outflows through August, according to some estimates.
Investor sentiment was depressed Tuesday by new profit warnings, this time from Maytag and forest products company Weyerhaeuser.
Retail stocks continued to sink after Wal-Mart Stores on Monday said sales are coming in at the low end of expectations, further adding to doubts about the economy.
The Federal Reserve, in its statement Tuesday, said it still is confident the economy is on a recovery path. But the central bank also said the greater risk in the near term is of more weakness in business activity. That admission signaled that the Fed stands ready to cut interest rates if needed.
Yields on Treasury securities fell across the board Tuesday, which analysts said reflected investors’ search for a haven as stocks slid, as well as expectations that the Fed will cut its key rate in the next few months.
The 10-year Treasury note yield fell to 3.64% from 3.70% Monday, and is the lowest in 40 years.
In other trading, near-term gold futures in New York gained $2.90 to $325.90 an ounce, the highest since the price peaked at $327.80 on June 4.
Among Tuesday’s highlights:
* European stock markets fell to fresh 5 1/2-year lows. The German DAX index lost 1.4%. The French market fell 1.8%.
* Weyerhaeuser’s profit warning clipped its stock by $5.94 to $43.79. Other paper and lumber shares also fell, including Bowater, down $1.84 to $35.92, and Kimberly-Clark, down $1.38 to $55.75. International Paper lost $2.21 to $31.94, but after regular trading ended the company reaffirmed its third-quarter earnings outlook.
* Oil stocks were lower even though crude futures ended at a new 52-week high, adding 6 cents to $30.77 a barrel. Exxon Mobil lost 77 cents to $31.95; BP dropped $1.22 to $39.65.
* Utility shares were broadly lower on new concerns about the industry’s health. Duke Energy fell 57 cents to $19.24, Mirant lost 22 cents to $2.03 and Reliant Resources slid 67 cents to $2.44.
Market Roundup, C6-7
