- The Washington Times - Wednesday, August 22, 2001

NEW YORK (AP) Stock prices tumbled again yesterday, carrying the Dow Jones Industrial Average down 146 points after the Federal Reserve Board made its seventh interest rate cut this year but failed to predict that a business recovery would occur soon.

The Nasdaq Composite and Standard & Poor's 500 indexes, which already were trading at levels last seen in April, also fell sharply in a sell-off that came late in the session. Analysts said the widely anticipated Fed cut, a quarter point, wasn't enough to offset the frustration of investors fed up with poor earnings and the lack of good economic news.

The Dow closed down 146 points at 10,174, a decline of 1.4 percent, falling back from gains of as much as 58 points before the Fed decision.

Broader stock indicators also dropped. The Nasdaq fell 50 to 1,831, a 2.7 percent loss, while the S&P; 500 skidded 14 points to 1,157, a 1.2 percent decline. The closes were the weakest finishes for both indexes since April 9.

"The Fed indicated the economy was weaker than most stock market participants had thought it was, which means a postponement in any earnings recovery," said David Lindsay, a fixed-income portfolio manager at Fleet Asset Management. "This upset some investors, who had expected an easier turnaround."

In its midafternoon announcement, the Fed cut rates a quarter percentage point and noted consumer demand still existed, but that business spending continued to deteriorate. The central bank expressed concerns about conditions in the United States and overseas "that may generate economic weakness in the foreseeable future." The statement also leaves the door open to additional cuts when the Fed meets in October.

The central bank's worried tone was enough to reverse a moderate stock advance that had begun in the morning as investors bet on a more upbeat Fed assessment or a bigger-than-expected rate cut.

The Dow closed lower with losses particularly concentrated in financial and retail stocks. American Express dropped $1.55 to $36.60, while Wal-Mart lost $1.65 to $49.94.

Technology stocks also fell as investors lost confidence that business spending would pick up soon. Cisco Systems fell 89 cents, or 5 percent, to $16.01, while Microsoft dropped $1.92, or 3 percent, to $60.78.

Analysts said investors are further disheartened that the Fed's six earlier cuts this year so far have failed to stimulate growth and the overall business climate remains anemic.

Moreover, second-quarter corporate results were dismal and early indications are that the third quarter isn't going to be better, making it hard for many on Wall Street to envision when a turnaround will occur.

"There wasn't anything in the Fed's statement to make people buy stocks, so we've got more of what we've had the last three weeks," said Bill Barker, investment consultant at Dain Rauscher.

Also yesterday, Goldman Sachs chief market strategist Abby Joseph Cohen lowered her 2001 estimates for the S&P; 500. In a research note, she said she now expects the S&P; 500 to be at 1,500 by year's end, a reduction from her previous estimate of 1,550. For the Dow, she still is predicting 12,500 by the end of the year.

Her projections, though, are still quite bullish. The Dow would have to rise nearly 23 percent and the S&P; nearly 30 percent to meet those goals.

Declining issues led advancers 3 to 2 on the New York Stock Exchange. Consolidated volume came to 1.24 billion shares, compared with 1.07 billion shares on Monday.

The Russell 2000 index slipped 6.63 to 472.24.

Overseas, Japan's Nikkei stock average rose 0.2 percent. In Europe, Germany's DAX index rose 0.1 percent, Britain's FT-SE 100 advanced nearly 1.4 percent, and France's CAC-40 gained 0.9 percent.


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