by last counts country lost 6800 people and $1.4 trillion
U.S. Stocks Decline as Dow Heads Toward Worst Week Since 1933
2001-09-21 15:50 (New York)
U.S. Stocks Decline as Dow Heads Toward Worst Week Since 1933
New York, Sept. 21 (Bloomberg) -- U.S. stocks fell for a
fifth day, pushing the Dow Jones Industrial Average toward its
worst week in almost 70 years, as investors said the terrorist
attack will deepen the economic slowdown that is damping corporate
profits.
About $1.38 trillion in value has been erased since trading
resumed Monday after the destruction of the World Trade Center.
EMC Corp., the biggest maker of data storage systems, and Dow
Chemical Co., the largest U.S. chemical company, dropped after
lowering profit forecasts. Microsoft Corp., Intel Corp. and Cisco
Systems Inc. led the Nasdaq Composite Index to a three-year low.
``The reality is coming home that this is going to be a
severe economic downturn,'' said Tim Stevenson, who manages the
$450 million Evergreen Special Equity Fund in Charlotte.
``Investors are coming to grips with that.''
The Dow sank 155.55, or 1.9 percent, to 8220.66, for a 14.4
percent slide this week. That would be the average's biggest
weekly decline since the five days ended July 21, 1933.
The Nasdaq fell 48.54, or 3.3 percent, to 1422.39. The
Standard & Poor's 500 Index declined 19.78, or 2 percent, to
964.76.
Wary Investors
Investors are wary of buying stocks ahead of the weekend
because they don't know what military steps the U.S. might take
and they fear the possibility of further attacks, Stevenson said.
In a speech to Congress last night, President George W. Bush
demanded Afghanistan's Taliban regime turn over Osama bin Laden,
the prime suspect, and clear out all camps operated by his terror
network. As Bush spoke, U.S. ships, planes and troops were moving
toward staging areas in the Persian Gulf.
Bush ``sounded forceful and what he said was good,'' said
Bruce Simon, chief investment officer with Glenmede Trust Co. in
Philadelphia, which manages $18 billion.
``One take on it is that he set the bar pretty high in terms
of wiping out terrorism,'' Simon said. ``That means this is going
to weigh on the market for quite a long time to come.''
Some 2.1 billion shares traded on the New York Stock Exchange
by 3:45 p.m. in New York time, putting the Big Board on track for
one of its busiest days ever. More than three stocks fell for
every one that rose on the Big Board and the Nasdaq Stock Market.
EMC Forecast
EMC, the largest maker of data storage systems, fell $1.25 to
$11.37 after saying it's unlikely to break even in the third
quarter because of slumping sales. Analysts had been forecasting a
one-cent profit. The maker of data storage systems also said it
will fire 10 percent of its workers.
The company said the forecast doesn't reflect any estimate of
the effect of the terrorist attack. Some investors have predicted
EMC may benefit as companies place a higher priority on backing up
data in the aftermath of the attack.
``People were hopeful'' that EMC would at least hint at
improvement in its outlook because of the attack, and they were
disappointed, Evergreen's Stevenson said. Any pickup in corporate
spending on network equipment or data storage may have to wait
until next year, he said.
Network Appliance Inc., which also makes data storage
equipment, lost 87 cents to $8.26, and StorageNetworks Inc. slid
37 cents to $4.66.
ONI Systems Corp., which makes equipment for urban fiber-
optic communications networks, dropped $3.93, or 47 percent, to
$4.344 after lowering its third- and fourth-quarter revenue and
profit forecasts. ONI, which has lost more than three-quarters of
its value in 2001, cited a global slowdown in telecommunications.
Among other technology companies, Microsoft fell $1.77 to
$48.99, Intel lost $1 to $19.67, and Cisco declined 77 cents to
$12.10.
Dow Chemical
Dow Chemical fell 42 cents to $29.16. The company said third-
quarter profit will fall short of forecasts because the slumping
economy cuts into demand for plastics and chemicals that it makes
for use in such things as cars and building materials.
Fewer then 120 stocks in the S&P 500 rose today, and in early
trading all 30 of the Dow Industrials dropped.
``This is just emotion-driven panic selling,'' said James
Gribbell, who helps manage $65 billion at David L. Babson & Co. in
Cambridge, Massachusetts. ``Foreign investors are pulling out of
the U.S., institutional investors are raising cash and retail
investors are throwing in the towel,'' he said.
The quarterly expiration of options on stocks, stock-index
futures and index futures -- known as ``triple witching'' -- also
is pushing stock prices lower and boosting the number of shares
traded. Just before the market opened, prospective sellers
outnumbered buyers in 134 New York Stock Exchange issues.
At the expiration, investors who had purchased or sold
futures and options unwind those positions. Brokers who deal in
futures and options, who must buy or sell the underlying shares as
a hedge, reverse those trades as well.
General Electric
General Electric Co. rose 72 cents to $31.09, paring its loss
for the week to 21 percent this week, after Chief Executive
Jeffrey Immelt said the company will meet its profit forecasts for
this year and next.
Immelt said growth at the company's power, financing and
medical-imaging units will mitigate the effects of the attack on
other businesses such as insurance and aircraft engines.
``We're going to manage our way through the airline issues,
we're going to manage our way through the insurance issues and
through the downturn,'' he said.
Immelt's comments sparked a rally that lifted benchmark
indexes off their lows and briefly gave the Dow a gain for the
day. The rally fizzled, though, after about half an hour.
PG&E Corp. rose $1.21 to $16.93 after its bankrupt utility
unit, Pacific Gas & Electric Co., filed a plan with the bankruptcy
court that would separate it from the parent company. The plan
proposes to pay all creditors of California's largest utility
using $13.2 billion in cash and new notes.
Railroad stocks also gained. CSX Corp. climbed $2.24 to $29,
Burlington Northern Santa Fe Corp. advanced $2.01 to $25.46, and
Union Pacific Corp. rose $2.02 to $46.83.
Profit Forecasts
Companies in the airline, insurance and brokerage industries
have said that their results will be less than forecast because of
the immediate losses and ongoing disruptions caused by the attack.
Other companies, including automakers and retailers, have also
warned of slower sales as worried consumers rein in spending.
Through yesterday, 69 companies had cut their forecasts,
according to Thomson Financial/First Call.
CVS Corp., the second-largest drugstore chain, joined those
ranks today. CVS reduced its third-quarter profit forecast because
of slower sales in September stemming from declining consumer
confidence following last week's attacks. CVS fell $2.78 to
$32.57.
SanDisk Corp. fell $1.37 to $10.62. The maker of computer
memory chips said it will have a wider third-quarter loss than
expected because of weakening demand and lower prices. SanDisk
expects a third quarter loss of 60 cents a share, previously it
forecast a loss of 10 cents to 15 cent.
DoubleClick, an online advertising company, fell 83 cents to
$6.22 after forecasting a third-quarter loss, excluding certain
costs, that will be wider than analysts were expecting.
DoubleClick said demand for advertising and software is slumping
after last week's terrorist attacks.
The Russell 2000 Index of smaller stocks dropped 10.75, or
2.8 percent, to 376.90. The Wilshire 5000 Total Market Index, the
broadest measure of U.S. shares, declined 168.50, or 1.9 percent,
to 8904.74.
--Robert Dieterich in the New York newsroom (212) 893-4485, or at
rdieterich@bloomberg.net, with reporting by Danielle Sessa/lw/nh
Story illustration: To graph the performance of the Dow
Industrials this week, enter {INDU <Index> GIP5 <GO>}.
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