- The Washington Times - Saturday, June 22, 2002

NEW YORK (AP) Stocks tumbled on yet another spate of bad corporate news and fears of terrorism yesterday, giving Wall Street its fifth straight losing week and pulling the major indexes closer to their post-September 11 lows. The Dow Jones industrial average suffered its third straight triple-digit loss.

Investors shrugged off a bullish forecast from Qualcomm, focusing instead on questions about Merck's accounting and earnings prospects for IBM and United Technologies. Another FBI warning of a possible attack reinforced the market's pessimism.

"There's a total lack of confidence right now," said John Lynch, chief market analyst at Evergreen Investments. "Earnings, the war on terrorism, the crisis in the Middle East, corporate accountability all of this is weighing on investors' minds and keeping them away."

The Dow fell 177.98, or 1.9 percent, to 9,253.79, its lowest close since Oct. 31, when it stood at 9,075.14. Over the last three sessions, it has fallen 452.33.

Broader stock indicators dropped to their lowest closes since Sept. 21, the end of the first week of trading after the terror attacks. The Standard & Poor's 500 lost 17.15, or 1.7 percent, to 989.14, while the Nasdaq Composite Index fell 23.79, or 1.6 percent, to 1,440.96.

Market statistics bear out how much stocks have suffered:

•Over the past week, the Dow has lost 2.3 percent, the Nasdaq has stumbled 4.2 percent and the S&P is down 1.8 percent.

•Since May 17, the last time the market had a winning week, the Dow and S&P have each fallen 10.6 percent, while the Nasdaq has lost 17.3 percent.

•The Nasdaq is just 1.3 percent above its Sept. 21 close, and the S&P has 2.4 percent to go. The Dow is in somewhat better shape, standing 12.4 percent above its post-attack low.

Qualcomm delivered the kind of good news the market has wanted, increasing its third-quarter forecast and citing improved demand for its wireless technology. Its stock rose 21 cents to $26.12.

But investors were focused on the negative.

IBM lost $2.83, or almost 4 percent, to $68.75 after Lehman Brothers reduced its earnings estimates for the company. Investors also shunned Merck, sending it down $2.22, or 4.3 percent, to $49.98, after a Wall Street Journal story that questioned its accounting practices. Merck, which denies any wrongdoing, is the latest in a string of companies to come under scrutiny for its bookkeeping.

And United Technologies declined $3.05, or 4.4 percent, to $65.75 after Merrill Lynch downgraded the stock, citing limited growth prospects in the short term.

All three stocks are Dow components, and their declines contributed significantly to the average's slide. But other stocks fell, too.

In the technology sector, Cisco Systems tumbled 34 cents to $13.74 and Texas Instruments dropped $1.54 to $22.93. Among blue chips, Target lost $1.05 to $36.80 and Citigroup fell 69 cents to $39.80.

Also yesterday, the FBI warned law enforcement agencies that terrorists might be plotting to use fuel tankers against Jewish neighborhoods and synagogues, according to officials who did not want be to named by the Associated Press.

Investors have grown increasingly pessimistic about the prospects for a robust recovery. The fear that corporate profits will only improve moderately is keeping many would-be buyers on the sidelines.

That lack of confidence has brought the major indexes increasingly closer to the lows that followed the September 11 terrorist attacks. Second-quarter earnings reports due out next month aren't expected to be enough by themselves to lure investors back to the market, but analysts are hopeful that third-quarter outlooks and eventually, the actual results will be upbeat enough to encourage investment.

"When we wrap up the second quarter and move into the third quarter and see that business is improving, that should have a significant impact," said Kevin Caron, market strategist at Ryan, Beck & Co. LLC. "Stocks will reach a point where investors are willing to take a risk, to step in."

Trading was brisk because yesterday was what is called a triple-witching session, the quarterly expiration of index futures and index and stock options. Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume came to 1.81 billion shares, compared with 1.35 billion shares Thursday.

The Russell 2000 index rose 0.82 to 461.07, a sign that smaller stocks were holding up better than their blue-chip counterparts. The index advanced 0.4 percent for the week.

Overseas, Japan's Nikkei stock average fell 2.4 percent. In Europe, Germany's DAX index lost 0.3 percent, Britain's FTSE 100 was up 0.6 percent and France's CAC-40 dropped 0.9 percent.

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