- The Washington Times - Wednesday, August 29, 2001

NEW YORK (AP) Stock prices fell sharply yesterday when a report of slumping consumer confidence raised Wall Street's fears about a further delay in an economic recovery.

The report from the Conference Board upset investors who had been consoled in recent months by the fact that consumers kept buying houses, cars and clothes, although at a slower pace.

"The consumer is the glue that is holding things together," said Jon Brorson, director of equities at Northern Trust, adding that there is a fear on Wall Street that Americans will "get really afraid and hibernate and really send the economy south."

Analysts said the decline in consumer confidence could trigger another downward cycle for the market. That appeared to be the case yesterday, when the Dow Jones Industrial Average finished down 160.32, or 1.5 percent, at 10,222.03.

The broader market also suffered as the Nasdaq Composite Index fell 47.43, or 2.5 percent, to 1,864.98, and the Standard & Poor's 500 index declined 17.70, or 1.5 percent, to 1,161.51.

The market fell in early trading and widened its losses after the Conference Board said consumer confidence fell for the second straight month in August amid concerns over layoffs and unemployment. The business-research group said its Consumer Confidence Index fell to 114.3 from a revised 116.3 in July, a weaker showing than analysts expected.

Investors were also worried about the Commerce Department's report on the gross domestic product due out today. The report will be a second estimate of how the economy fared during the second quarter; in its first estimate, issued July 27, the government said the economy rose a meager 0.7 percent.

A string of disappointing economic news and profit warnings for the remainder of the year have eroded investors' hopes that business will get better during 2001. Rather, the market is getting increasingly frustrated that the seven interest rate cuts made this year have failed to stimulate the economy.

"Buyers simply have no sense of urgency to commit in the current, uncertain environment. They know they are going into a bleak earnings period in the third quarter and the earnings [warnings] are going to come right after Labor Day," said Bill Barker, investment consultant for Dain Rauscher. "There is no good news to offset the lack of buying enthusiasm."

While the entire market was hurting yesterday, some of the biggest losses came from a variety of consumer stocks. Procter & Gamble fell $1.85 to $74.99, and Home Depot stumbled $1.05 to $47.90. American Express fell $1.02 to $37.01, while DaimlerChrysler declined 65 cents to $45.80.

In the technology sector, which has endured the economic slowdown the longest, decliners included companies whose future earnings and revenue were in question.

Sun Microsystems fell 94 cents to $13.56 after Goldman Sachs reduced its fiscal 2002 earnings estimate for Sun to 28 cents a share from 37 cents, citing a slow economic recovery and the possibility of more layoffs at the company.

Software maker Oracle tumbled 92 cents to $14.01 on news that a senior sales executive, Edward "Sandy" Sanderson, who handles key clients, is taking a leave of absence for an unspecified time period.

Declining issues outnumbered advancers slightly more than 3-to-2 on the New York Stock Exchange. Volume came to 967.77 million shares, ahead of the 846.47 million shares that were traded on Monday.

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