Market Takes Another Dive: Pessimistic Earnings, Sales Reports Fuel Drop
A deluge of pessimistic reports about company sales and earnings are undermining hopes that the U.S. economy can recover by year's end, sending the stock market sharply lower.
With such major companies as Exxon Mobil Corp., AT&T Corp. and Lucent Technologies Inc. reporting disappointing earnings, stocks fell for a third day Tuesday.
The Dow Jones industrial average dropped 183.30 points, or 1.76 percent, to close at 10,241.12, after a 152-point loss on Monday. The Nasdaq composite index fell 29.32, or 1.5 percent, to 1959.24, and the Standard & Poor's 500-stock index declined 19.38, or 1.6 percent, to 1,171.65.
"The shock effect is that people realize this is not going to be over in another quarter or two," said Eric Leo, chief investment officer for Allied Investment Advisors in Baltimore.
With scores of companies lowering their sales outlook for the remainder of the year and many announcing job cuts - Lucent said it was cutting at least 15,000 additional jobs - investors have concluded the economic turnaround many had expected by fall won't come until the first-quarter of 2002 or later, according to analysts.
Adding to the pessimism is the worsening economic picture overseas, especially in Japan, the world's second-largest economy.
The Nikkei-225 index, Japan's key stock market indicator, has tumbled to a 16-year low, raising concerns about the health of Japan's banks and financial system. The strong dollar is also expected to hurt U.S. exporters because it makes their goods more expensive overseas.
Even Federal Reserve Chairman Alan Greenspan's comments Tuesday, in testimony before the Senate Banking Committee, that the Fed may have to lower interest rates again if the economy fails to improve, did not boost the market.
About 1,600 companies are issuing their earnings reports this week and, so far, no sector has been spared from disappointment, according to analysts. Second-quarter profits for S&P 500 companies are expected to have declined 17.3 percent, according to First Call/ Thomson Financial, which tracks the earnings forecasts of analysts.
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