- The Washington Times - Thursday, October 10, 2002

A dimming outlook for American icons GE and GM drove stocks down to new five-year lows yesterday, with the Dow Jones Industrial Average tumbling 215 points to 7,286.
All the major indexes fell to levels not seen since the Asian financial crisis hit the markets in October 1997, or even earlier. The Standard & Poor's 500 index fell 2.7 percent to 777, while the Nasdaq Composite Index sank 15 points to 1,114.
The broad sell-off, with more than six stocks declining for every one that rose on the New York Stock Exchange, began when top brokerage houses lowered their forecasts for growth at General Electric and General Motors, citing the underperforming economy.
Both bellwether stocks previously had enjoyed solid earnings growth and fared comparably well in the bear market.
"GE is seen as a paragon of American companies," said Charles Pradilla, chief investment strategist at SG Cowen Securities. "The market was not in the mood to have GE taken down and punished in public."
"The real problem has been, across the board, we've been getting earnings disappointments and downgrades," he said.
GE fell $1.35 to $22 after Morgan Stanley lowered its 2003 estimate for the massive conglomerate. GM dropped $2.59 to $31.01 after Lehman Brothers and Morgan Stanley cut their outlooks for the world's largest automaker.
Stock indexes as of yesterday's close had fallen so far that most analysts have given up hope they will post gains this year. The indexes are down between 30 percent and 40 percent from already depressed levels at the beginning of the year.
One of Wall Street's most enduring bulls, Abbey Joseph Cohen, the chief investment strategist at Goldman Sachs & Co., announced she is slashing her 12-month target for growth in major indexes, citing "the difficulty of quickly restoring investor confidence."
She cut her target for the S&P; index to 1,150 from 1,300, and said the Dow would rise to 10,800 instead of 11,300 in the next year. Achieving the new targets still would require a robust rally of 40 percent to 50 percent, not often seen on Wall Street.
Some analysts see signs that the market may finally be reaching bottom after giving investors a horrifying ride this year. A survey of sentiment on Wall Street published yesterday sank to the most bearish level in nearly eight years a contrarian signal that the worst may be over.
From the contrarian point of view, when the majority of investors are bearish, they probably have already pulled most of their money out of the market, relieving selling pressure and setting stocks up for a rally.
"Now is the time to start going into stocks, because people are just throwing them out," said James McGlynn, portfolio manager at Summit Investment Partners.
Airline stocks took a hit after a downgrade of AMR, parent of American Airlines, from Credit Suisse First Boston Corp. AMR fell 61 cents to $3.31, while UAL dropped 21 cents to $1.87.
SunTrust Banks declined $2.65 to $51.79 after reporting earnings that fell short of analysts' expectations.
And J.P. Morgan Chase declined $1.15 to $15.45 on a downgrade from Moody's, which expressed concern about the company's investment banking and capital markets businesses. Standard & Poor's and Fitch previously had lowered their ratings of the bank's debt.
Gainers included Sara Lee, which rose $1.57 to $21.47, after the packaged-foods giant raised its first-quarter outlook, citing lower costs. Corning climbed 13 cents to $1.23 after the fiber-optics maker said third-quarter losses would be at the lower end of earlier estimates.
This story is based in part on wire service reports.


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