- The Washington Times - Saturday, May 11, 2002

NEW YORK (AP) Uneasy investors again opted for safety yesterday, taking profits for a second straight day and leaving the market indexes with only modest gains from the huge rally on Wednesday.

The two-day sell-off wasn't surprising given the triple-digit surge of blue-chip and technology stocks during the rally. But the drop was disappointing for investors who had hoped that the market would be able to keep more of its big advance.

The week ended up being another loser for the market, the third in a row for the Nasdaq Composite Index and the Standard & Poor's 500 Index.

"It was too much, too soon," Hugh Johnson, chief investment officer for First Albany Corp., said of the earlier rally. "There is a message that has been coming for a long time, and that is economists and strategists are too optimistic about the outlook for the economy and earnings. The recovery is not going to come as soon as they expect, or be as strong as they expect. The market has gone down to reflect that."

Investors had first believed that earnings would recover in the first quarter, but their hopes for the second quarter are diminishing. Mr. Johnson said a third-quarter recovery could also prove to be more premature, optimistic thinking.

The Dow Jones Industrial Average closed down 97.50, or 1 percent, at 9,939.92. The blue chips kept about a third, or 103.37, of their 305.28-point gain from Wednesday.

The Dow ended the week down 0.7 percent.

The broader market also declined for the second straight day, and ended a third consecutive week with losses. The Nasdaq Composite Index fell 49.64, or 3.0 percent, to 1,600.85. The Nasdaq lost all but 27.03 of the 122.47 points gained on Wednesday.

The Nasdaq fell for the third straight week, this time losing 0.8 percent.

The S&P's 500 Index yesterday declined 18.02, or 1.7 percent, to 1,054.99. After two days of selling, the S&P was left with 5.50 points of the 39.36 gained Wednesday. It ended the week down 1.7 percent, its third straight weekly loss.

Selling has dominated Wall Street for weeks, with investors unloading shares based on companies' inability to reassure them that business is improving and profits are strengthening. Meanwhile, rallies have been short-lived rebounds because investors see little reason other than occasional bargain hunting to buy stocks.

Likewise, the rally on Wednesday was an aberration, and investors "kind of went overboard," said Stephen Carl, head of equity trading at the Williams Capital Group.

"What you have to see is continually good economic numbers, which we aren't seeing, and more positive corporate earnings, which we don't have. Until that happens on a consistent basis, people are really hesitant to jump in," Mr. Carl said.

While positive earnings reports from technology companies have the most sway with investors, the sector has been on a steady decline all year, as it is expected to be the last to emerge from recession. Year-to-date, the Nasdaq has tumbled 17.9 percent.

Other tech losers yesterday included Dell Computer, falling $1.36 to $23.88, Texas Instruments, stumbling $1.09 to $28.70, and Intel, declining $1.23 to $27.01.

Investors also pulled out of blue chips, despite the stocks' reputation for safety in bearish markets. Wal-Mart fell $1.33 to $53.66, Caterpillar retreated $1.05 to $52.81, and Citigroup stumbled $1.03 to $43.30.

The market was unimpressed by a report from the government that wholesale prices dipped by 0.2 percent in April. The decline in the Producer Price Index, which measures inflation costs before they reach consumers, was the biggest in four months.

Declining issues outnumbered advancers about 2-to-1 on the New York Stock Exchange. Volume came to 1.17 billion shares, just ahead of the 1.15 billion shares reported Thursday.

The Russell 2000 index, which tracks smaller company stocks, fell 8.66, or 1.7 percent, to 492.73. For the week, the Russell dropped 3.8 percent.

Overseas markets also fell. Japan's Nikkei stock average finished yesterday down 0.9 percent, France's CAC-40 fell 1.3 percent, Britain's FTSE 100 declined 0.5 percent, and Germany's DAX index lost 1.9 percent.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide