- The Washington Times - Wednesday, July 10, 2002

NEW YORK (AP) Investors sent stocks sharply lower for a second consecutive session yesterday as worries about second-quarter earnings reports overshadowed President Bush's proposal to increase the penalties for corporate fraud.

The losses, which followed a sell-off Monday, erased much of Friday's big rebound rally. Analysts said that after months of accounting scandals and disappointing financial results, it will take more than a few words to convince investors that it is safe to come back to the market.

"We're just coming into earnings season now," said Will Braman, chief investment officer at John Hancock Funds. "It's time for 'show us the money,' and investors' expectations are not very high. There is a lot of skepticism. The numbers we get are going to be pawed over and looked at very critically."

The Dow Jones industrial average closed down 178.81, or 1.9 percent, at 9,096.09. It was the average's second triple-digit decline this week, for a total loss of 283.41, nearly erasing Friday's 324-point gain. Stocks had pulled back Monday as investors collected profits.

Broader stock gauges also retreated yesterday. The Standard & Poor's 500 Index fell 24.15, or 2.5 percent, to 952.83, and the Nasdaq Composite Index lost 24.49, or 1.7 percent, to 1,381.12. This week alone, the Nasdaq has tumbled 4.6 percent.

Mr. Bush called for longer prison sentences for executives who defraud the public and for more authority for the Securities and Exchange Commission. He also wants to put together a task force to pursue and prosecute corporate fraud.

His remarks came in response to scandals at companies ranging from Enron to WorldCom that have cost investors billions of dollars. Investor confidence, already fragile because of the economic slump, has further declined amid the reports of accounting irregularities, contributing to the stock market's malaise.

Mr. Bush's comments failed to convince disillusioned investors that better days were ahead, however perhaps because it's too soon to tell whether his proposals will be implemented.

"I think actions speak louder than words. If somebody goes to jail, maybe people will take corporate America a little more seriously," said Jack Francis, head of Nasdaq trading at UBS Warburg.

Analysts also said investors were reluctant to make any big commitments without more earnings information. Second-quarter reports are due out this month, and, after two years of losses, most on Wall Street are unwilling to make many bets.

"When we start to get some earnings, that should give the market a reason to move," said Bill Meade, managing director and head of Nasdaq trading for RBC Capital Markets.

Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume came to 1.34 billion shares, compared with 1.16 billion Monday. Decliners led advancers 5 to 4 on the Nasdaq Stock Market.

The Russell 2000 index fell 4.36 to 429.25.

Overseas, Japan's Nikkei stock average rose 1.8 percent. In Europe, Germany's DAX index lost 1.6 percent, Britain's FTSE 100 was down 1.3 percent and France's CAC-40 lost 1.0 percent.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide