- The Washington Times - Wednesday, August 28, 2002

NEW YORK (AP) A sharp drop in consumer confidence cooled investors' enthusiasm for stocks yesterday, sending the market sharply lower and more than wiping out Monday's gains. Technology suffered the worst of the selling after bearish comments from Intel's chief executive.
But because the market was primed for profit-taking anyhow following five winning weeks on Wall Street, analysts were pleased that a bigger sell-off didn't develop.
"The market is getting some heartburn today from the consumer confidence number," said David Sowerby, chief market analyst, Loomis, Sayles & Co. in Detroit. "But at the same time, what gives me some encouragement is that the rally that started on July 23 is not being derailed."
The Dow Jones Industrial Average closed down 94.60, or 1.1 percent, at 8,824.41, after rising 46.05 Monday. But, the Dow is still up more than 1,100 from its July 23 closing low of 7,702.34.
The market's broader gauges also retreated. The Nasdaq Composite Index fell 43.96, or 3.2 percent, to 1,347.78, having gained 11.12 in the previous session. The Standard & Poor's 500 Index declined 13.13, or 1.4 percent, to 934.82 following a gain of 7.09.
Investors were disheartened by a report from the Conference Board that its Consumer Confidence Index fell to 93.5 from a revised 97.4 in July. Analysts had been expecting a reading of 97.
That bad news erased early gains in blue chips that followed an upbeat report on durable-goods orders. The Commerce Department said orders for big-ticket goods surged by 8.7 percent in July, the largest increase in nine months and far better than analysts' expectations.
Investors are refocusing on how the economy is doing, now that corporate-accounting scandals are subsiding, analysts said. Investors are eager to see signs that the economy is strengthening, and analysts say the market's ability to advance over the longer term depends on this.
Still, analysts deemed yesterday's batch of economic news to be mostly positive, because consumers have remained rather strong throughout the economic downturn. The durable-goods orders are a greater indication that the economy is indeed recovering, not slipping back into recession, analysts said.
"It is encouraging more than anything. The consumer remains OK, just not as OK," said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray. "The broader news is durable goods orders, and that at least provides some cushion relative to the double-dip [recession] worries."
Intel fell 95 cents to $17.18 after bearish remarks yesterday by Chief Executive Officer Craig Barrett. According to published reports, Mr. Barrett expects modest growth in third-quarter earnings but said capital spending in the computing sector continues to lag.
Other tech stocks fell, including Dell Computer, down 73 cents at $27.15, and Cisco Systems, off 47 cents at $14.02.
Hewlett-Packard declined 64 cents to $14.21 ahead of its fiscal third-quarter earnings report. After the market closed, H-P reported profits that met analysts' expectations, and the company reaffirmed its fourth-quarter outlook. H-P recouped some of its losses in extended-hours trading, rising 29 cents.
Retailers fell on a string of downgrades by Merrill Lynch. AnnTaylor dropped $2.19 to $26.50, while Talbots declined $1.69 to $32.06.
Gainers included some makers of durable goods. Whirlpool rose 72 cents to $57.38, and DaimlerChrysler gained 44 cents to $44.76.
Declining issues outnumbered advancers about 8 to 5 on the New York Stock Exchange. Volume was light at 1.23 billion shares, but ahead of the 1 billion traded Monday.
The Russell 2000 index, the barometer of smaller-company stocks, fell 10.28, or 2.5 percent, to 397.45.
Overseas, Japan's Nikkei stock average finished Tuesday down 1.6 percent. But stocks were higher in Europe, where Germany's DAX index rose 1.8 percent, France's CAC-40 climbed 2.9 percent and Britain's FTSE 100 gained 1.4 percent.

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