Gst, when do you think the shorts will get a sharp stick up the backside? Right about now?
>Friday, August 17, 2001
Last updated at 2:23:20 PM PT
By AMY BALDWIN
AP BUSINESS WRITER
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NEW YORK -- Profit warnings from Dell Computer and Gap, job cuts by Ford Motor, an appeals court decision against Microsoft and a sharp decline in sales of U.S. goods abroad all combined to pummel Wall Street Friday.
The Dow Jones industrials fell as much as 200 points before rebounding somewhat late in the session, while the Nasdaq composite index hit a new four-month low.
"The bad news sort of overcomes the good here," said Charles White, portfolio manager at Avatar Associates.
The sharp sell-off was an indication that investors are relinquishing their hopes that business will get better by the end of 2001.
"The bottom line is the market is coming to the realization that the second-half recovery is not going to be," said Gary Kaltbaum, market technician for Investors' Edge Partners.
The Dow Jones industrial average fell 151.74, or 1.5 percent, to 10,240.78. The Dow was down 204 points just before the market closed.
The broader market also posted big losses. The Nasdaq composite index tumbled 63.31, or 3.3 percent, to 1,867.01, its lowest close since it finished at 1,852.03 on April 10. The Standard & Poor's 500 index declined 19.69, or 1.7 percent, to 1,161.97.
Among Wall Street's biggest losers was Microsoft, both a Dow component and a Nasdaq stock, which fell $2.74 to $61.88 after a federal appeals court denied the software giant's request to delay its antitrust case.
But stocks fell across a broad range of sectors, in keeping with the fact that most companies cannot say when sales and earnings will improve.
"It's not just tech anymore. It's autos, some areas of health care - and retail looks bad," Kaltbaum said.
The widespread losses were also spurred by a report that the U.S. trade deficit widened in June as sales of American-made goods to other countries declined by a larger amount than imports. The Commerce Department reported Friday that the trade imbalance increased by 3.3 percent to $29.4 billion in June, matching many analysts' expectations.
That decline comes as the nation's manufacturers, including computer and auto makers, complain that the value of the dollar is too strong, making their goods expensive abroad.
Meanwhile, Dell declined $2.38 to $23 after issuing a third-quarter profit warning late Thursday and saying that demand likely won't pick up until next spring. Other technology companies suffered, including IBM, down $1.16 at $104.59.
Gap, which also warned about third-quarter profits, fell $1.92 to $21.43. Gap was also downgraded by Merrill Lynch, Prudential Securities and Credit Suisse First Boston. Other retailers suffered, including Wal-Mart, off 89 cents at $50.80.
Ford fell $1.77 to $21.70 after announcing it will eliminate up to 5,000 salaried jobs and warning its full-year earnings will miss expectations. Competitor General Motors stumbled $3.10 to $59.47, and was the weakest Dow industrial.
Analysts said investors see little reason to buy stocks now, after hearing a stream of profit warnings and dismal second-quarter results.
"It's somewhat of a credibility issue," Kaltbaum said. "Many market strategists had continued to come out and say that things will be better in the second half, and a bunch of companies also said that. And the market has come to the conclusion that they were all way off."
Wall Street is also anxiously awaiting next week's Federal Reserve Board meeting. The Fed is expected to reduce interest rates for the seventh time this year to lift the sagging economy. But investors may have already priced the expected quarter-percentage point cut, analysts said.
The market was so overloaded by disappointing news Friday that a relatively positive report on consumer spending failed to trigger buying or stave off losses. The University of Michigan's midmonth report on consumer sentiment for August reportedly rose to 93.5, compared with 92.4 for July.
The entire week was difficult for the market, particularly the Nasdaq, which lost 4.6 percent or 89.45 points. The Dow fell 175.47 or 1.7 percent, while the S&P slipped 28.19 or 2.4 percent.
On Friday, declining issues outnumbered advancers nearly 2 to 1 on the New York Stock Exchange. Volume came to 967.85 million shares, below the 1.06 billion shares that were traded Thursday.
The Russell 2000 index fell 6.03 to 475.65.
Overseas markets were also lower Friday. Japan's Nikkei stock average fell 0.6 percent, Germany's DAX index dropped 2.6 percent, France's CAC-40 fell 2.2 percent, and Britain's FT-SE 100 lost 0.9 percent. |
