Stocks Slide, Sending Dow Below 10,000 and Nasdaq to 9-Month Low

Wall Street was singing the summertime blues Friday, with the Dow Jones industrial average falling below 10,000 for the first time in two months and the technology-dominated Nasdaq index plunging 2.1% to its lowest level since October.

“It was an ugly, ugly day,” said Christopher Orndorff, portfolio manager with Payden & Rygel in Los Angeles.

Traders chalked up the rout to familiar villains: disappointing earnings from some key companies, concerns about the economy and stubbornly high oil prices.

“We are in an economic expansion, but I don’t think that people are believing it because we are not seeing the strong capital spending that would be needed to sustain it,” said David Brady, president of Brady Investment Counsel in Chicago.

“The traders I talk to say they’re not seeing any real demand for stocks. It’s difficult to find buyers -- but sellers are plentiful,” he added.

Nasdaq took the hardest hit of the benchmark indexes, diving 39.97 points to 1,849.09. The index, freighted with technology companies, is off more than 14% from its Jan. 26 high of 2,153.83.

Share prices of big industrial firms also slid, but more modestly.

The Dow Jones industrial average was off 0.9%, or 88.11 points, to 9,962.22, its first close below 10,000 since May 24. The Dow had been down as much as 119 points at the session low.

The Standard & Poor’s 500 index of blue-chip companies dipped 1%, or 10.64 points, to 1,086.20 -- just above the 2004 closing low of 1,084.10 reached on May 17.

More than two stocks declined for every one that advanced on the New York Stock Exchange and on Nasdaq.

Orndorff said Friday’s sell-off was largely a continuation of a malaise that started with the onset of summer. The S&P; 500 index has fallen for six weeks, and the Dow has lost ground for the last five weeks.

“A lot of it is related to earnings worries,” he said. “People are looking at this quarter’s earnings, and some of the companies that they thought were going to do really well haven’t. Next quarter is going to be tougher, so they’re thinking that things may get worse before they get better.”

Oil is another concern, with crude futures prices in New York rising for a third straight day Friday to $41.71 a barrel, up 35 cents. That spells higher transportation costs, which can cut into profits for a wide swath of companies.

At the same time, Federal Reserve Chairman Alan Greenspan made clear to Congress this week that he wouldn’t be shy about continuing to increase interest rates in order to keep inflation in check.

“You’ve got decelerating earnings growth and rising interest rates,” Brady said. “That’s a very difficult environment for stock prices to go higher.”

Companies that lowered earnings forecasts or posted disappointing profits were slammed Friday.

Amazon.com fell $5.84 to $39.98 after its second-quarter profit (reported after the market closed Thursday) came a penny shy of Wall Street estimates and the company said third-quarter profit would not meet analysts’ expectations.

Microsoft, which also gave a disappointing earnings report after the market closed Thursday, saw its shares fall 97 cents to $28.03.

With similar disappointments from Intel and EBay earlier in the week, Orndorff noted, investors are looking skeptically at almost all technology companies that have yet to report earnings.

Irvine’s Broadcom, which makes chips for computer networks and other uses, fell $2.22 to $34.18 a day after reporting that inventory levels rose 43% from the first quarter. An index of 18 big chip stocks slid 3.5%.

The biggest drag on the Dow and the S&P; 500 was Coca-Cola, whose shares dropped $3.80 to $45.17. The company said late Thursday that sales growth had slowed and that it was facing higher costs in the second half.

There were some winners on the day.

Cummins, which makes diesel engines, gained $2.89 to $64.90 after reporting a more-than-fivefold increase in second-quarter profit. And Champion Enterprises, the country’s biggest manufacturer of mobile homes, rose $1.88 to $9.55 on a strong earnings report.

“A lot of the boring companies did very well today,” Orndorff said, “but some of the highfliers didn’t.”