Stocks Dive, Closing Historical Week
By Haitham Haddadin
NEW YORK (Reuters) - Stocks slumped on Friday, with blue chips chalking up their biggest weekly loss since the Great Depression in the 1930s on growing fears over a worsening U.S. economy and a long war on terrorism after last week's deadly attacks.
``Right now, there are just falling knives everywhere,'' said Dirk van Dijk, who helps manage $4.5 billion for C.H. Dean & Associates. ``Who the hell wants to step in front of a freight train? On Monday we did some buying. Clearly we were premature.''
The week shattered records. The Dow Jones industrial average (^DJI - news) skidded a record 1,370 points, and its weekly percentage loss eclipsed the slides of the October crashes of 1987 and 1929. The New York Stock Exchange (news - web sites) clocked its three busiest days ever on Monday, Wednesday and Friday since it reopened after a four-day shutdown caused by the Sept. 11 terror assaults.
An upbeat earnings outlook from bellwether General Electric Co. (NYSE:GE - news) failed to fuel optimism after President Bush (news - web sites) prepared the nation for war on Thursday night. Wall Street has been jittery about a possible U.S. military response to the terror attacks that destroyed American landmarks and claimed thousands of lives.
The devastation sparked national mourning, massive layoffs, recession fears and plans for military retaliation. Stocks skidded to three-year lows, while U.S. Treasuries and gold climbed as investors fled to safe havens.
``You can't get a historical parallel. We are boxing with a ghost,'' said Richard Cripps, chief market strategist at Legg Mason Wood Walker. ``The market is oversold, but there is always an intangible factor to stock prices and an irrationality that they can reflect. You have to let it run its course.''
The Dow plunged 140.40 points, or 1.68 percent, to close at 8,235.81, after initially dropping more than 3 percent. The broader Standard & Poor's 500 Index (^SPX - news) sank 18.74 points, or 1.9 percent, to 965.80. The technology-laced Nasdaq Composite Index (^IXIC - news) tumbled 47.74 points, or 3.25 percent, to 1,423.19.
The Dow was down 14.26 percent for the week, second only to a 15.5 percent drop in the summer of 1933, according to the research firm MarketHistory.com. The Nasdaq crumbled by 16 percent and the S&P 500 fell 11.6 percent this week.
For the year, the Nasdaq is down 42.4 percent, Dow down 23.7 percent and S&P off 26,95 percent.
``The underlying tone here is just selling across the board,'' said Jeff Kleintop, chief investment strategist at PNC Advisors. ``There's the risk that the economy topples into a deeper recession ... and things can get worse just because of the military action and what repercussions result from that.''
More than three stocks fell for every one that rose on the New York Stock Exchange and 2-to-1 was Nasdaq's ratio of losers to winners. Trading was heavy with more than 2.3 billion shares changing hands on the NYSE, second only to the all time record $2.36 billion traded on Monday.
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Total investor losses of $6.8 trillion since stocks peaked in March 2000 are equivalent roughly to the combined economies of Japan, Germany and France. About $1.4 trillion in investor wealth has evaporated this week, raising fears consumer spending will drop and add more pressure to the economy.
General Electric offered a short-lived respite from the relentless selling after the conglomerate said it was on track to deliver double-digit earnings growth this year. But GE also said that it does not expect an economic rebound next year.
The Dow component climbed 93 cents to $31.30 and briefly pushed the blue-chip Dow gauge into positive ground.
But most other corporate news has been grim as companies ranging from airlines and publishers to financial services firms and software makers have announced big layoffs. The assaults paralyzed the travel industry, aggravated fears of a recession and threatened to damp consumer confidence.
The U.S. government rushed to provide a financial lifeline, a $15 billion bailout plan, for the faltering airline industry as industry job cuts in the United States exceeded 100,000 since the attacks on U.S. cities.
Northwest Airlines (Nasdaq:NWAC - news) joined other troubled airlines on Friday and cut about 10,000 people, or 19 percent, of its work force and permanently reduced its flight schedule by 20 percent. Northwest lost 56 cents at $10.45, or 5 percent.
EMC Corp. (NYSE:EMC - news) fell $1.47 to $11.15. The computer storage company said it would cut 10 percent of its work force, or more than 2,000 jobs, and probably report a quarterly loss, blaming a widening recession and slowing technology spending.
ONI Systems Corp. (Nasdaq:ONIS - news) plunged $3.38 to $4.99. The optical communications gear provider said its results for the remainder of the year would fall well short of expectations and it will post charges due to the deteriorating global telecommunications market.
U.S. mutual funds are on course to post their worst year ever, according to data that goes back to 1960 from fund research firm Lipper Inc. The average diversified U.S. stock fund is down 25.7 percent year to date through Thursday, exceeding a 24.9 percent drop for full-year 1974, Lipper said.
``There's margin calls, and there's not only redemptions, but also end of fiscal year tax-loss selling,'' said Richard Babson, president of Babson-United Investment Advisors, which manages $1.8 billion. ``But I expect the volatility to continue. There are some folks, even myself, who have money to put to work, but I waiting for things to stabilize.''
Earnings for companies in the S&P 500 are expected to fall 16.1 percent in the third quarter against a previous forecast for a drop of 14.4 percent before the attack, says market tracker Thomson Financial/First Call.
Palm Inc. (Nasdaq:PALM - news) fell 38 cents to $1.77. The company pulled the plug on plans to launch this year a highly anticipated wireless handheld computer, derailing any momentum gained after it delivered first-quarter results that met lowered expectations.
CVS Corp. (NYSE:CVS - news) fell $3.10 to $32.25. The drug store chain lowered its quarterly earnings outlook, saying its sales are expected to be hurt as consumer confidence wanes in the wake of the attacks. |
