Stocks Sink to Three-Year Lows
Tuesday September 18 4:58 PM ET
By Haitham Haddadin
NEW YORK (Reuters) - Stocks on Tuesday sank to lows unseen in nearly three years as a tepid rebound from Monday's slide fizzled amid growing fears that last week's terror attack on the United States will hurt corporate profits and spur a global recession.
``I don't think (investors) are willing to take any big bets right now,'' said Peter Gottlieb, portfolio manager at First Albany Asset Management in Chicago. ``Now we are going to start looking at what this all means to specific companies and the economy. I think, clearly, some corporate earnings are going to be hurt by this.''
Companies like airplane maker Boeing Co. (NYSE:BA - news) and financial giant American Express Co. (NYSE:AXP - news) fell on fears that their earnings would get hammered by last week's assault on the World Trade Center in New York's financial district and the Pentagon (news - web sites) near Washington D.C.
Technology stocks initially rose on an upbeat profit forecast by software maker Oracle Corp. (Nasdaq:ORCL - news), but gains evaporated in the afternoon. Battered airline stocks bounced, including Delta Air Lines (NYSE:DAL - news), recouping some of Monday's heavy losses on fears consumers will avoid flying in the wake of the attack.
``I think it's going to be days and weeks, maybe mid-October, before you can stage a sustainable rally,'' said Robert Robbins, chief investment strategist at SunTrust Robinson Humphrey. ``The impact of the terrorist attack has basically caused a downward revision of the consensus of the investment community from a near miss on a recession to a mild recession.''
The Dow Jones industrial average (^DJI - news) closed down 17.30 points, or 0.19 percent, at 8,903.40, its lowest finish since mid-December 1998. The broader Standard & Poor's 500 Index (^SPX - news) was down 6.03 points, or 0.58 percent, at 1,032.74. The technology-laced Nasdaq Composite Index (^IXIC - news) was down 24.47 points, or 1.55 percent, at 1,555.08. It was the lowest finish for the S&P and the Nasdaq since mid-October 1998.
Year to date, the Dow is down 17.5 percent, the S&P is off 21.8 percent and the Nasdaq is down 37 percent.
``The market was in an established downtrend ahead of this disaster and there's nothing about a disaster that should improve the established downtrend,'' said Michael Farr, president of Farr, Miller & Washington, a fund firm that manages $375 million.
``Earnings for most companies are going to be more negative largely because transportation, orders and commerce has been interrupted for this period and a consumer who was losing confidence has been shaken,'' he said.
Investors triggered a 685-point loss, the biggest point loss ever for the Dow on Monday, the first day of trading after the attacks closed markets for the longest period since the Depression. But the day's 7 percent loss did not make the top 10 percentage drops and amounted to less than one-third of the harrowing plunge on Black Monday, Oct. 19, 1987 -- bringing some sense of relief to traders who expected a worse rout.
``People are still very cautious,'' said James Park, senior vice president at brokerage Brean Murray & Co., ``There is too much uncertainty in the market to take a firm stance on anything.''
Tuesday's market action briefly pushed the blue-chip Dow Jones back above the 9,000-point level. Still, losers outpaced gainers on the New York Stock Exchange (news - web sites) by 19 to 12, and 348 stocks hit new 52-week lows.
A heavy 1.67 billion shares changed hands on the Big Board and more than 1.86 billion on the Nasdaq after record-setting day on Monday on the NYSE.
Investors, still mourning the more than 5,000 people feared dead in the Trade Center tragedy, are just beginning to think of how the attacks will pressure already weak corporate earnings.
American Express fell 9.49 percent, or $2.87 to $27.38. The company warned its profit would be below analysts' estimates, because the terror attacks would create additional economic and market weakness throughout the travel and financial services industry.
Boeing, down $2.66 to $33.14, continued Monday's slide on fears airline industry suppliers will axe workers and slash research spending as air travel shrivels. Fellow Dow component Honeywell International Inc. (NYSE:HON - news) fell 99 cents to $28.51, after warning of disappointing profits due to weakness in the commercial air transport market.
The Federal Reserve (news - web sites) on Monday in a surprise move cut interest rates for the eighth time this year to shore up the flagging economy. Analysts believe the Fed has room for more cuts, after the Labor Department (news - web sites) on Tuesday offered a tame inflation picture when it said U.S. consumer prices edged slightly higher in August.
A slew of other companies admitted that the attacks will slam their results, while some stood by financial targets.
Oracle added 37 cents to end at $11.38. The business software maker said its earnings will match year-ago levels, indicating its business is stabilizing. EBay Inc. (Nasdaq:EBAY - news) gained 60 cents to $50 after the online auction retailer stood by earnings and revenue estimates.
Computer memory maker Rambus Inc. (Nasdaq:RMBS - news) soared for the second day in a row, adding 16.7 percent to Monday's gains as investors cheered a $200 million, five-year licensing pact with Intel Corp. (Nasdaq:INTC - news), the No. 1 chipmaker. Rambus rose $1.11 to $7.76 while Intel gave up early gains to close down 12 cents at $23.47.
The Standard & Poor's airlines index (^SPAIR - news) bounced up 3.83 percent after Monday's stunning drop of 32 percent.
President Bush (news - web sites) is considering direct financial aid to help U.S. airlines reeling from the fallout of the attacks, Commerce Secretary Donald Evans told Reuters.
Among the airliners, Delta Air Lines (DAL.N) rose $2.28 to $22.92. Some, however, added to losses, including Continental Airlines (NYSE:CAL - news), off $2.33 at $17.72.
``It's just recalibrating and figuring out which companies, or how badly some companies, are going to be damaged by the slowdown in the economy after last week's events,'' said Gottlieb of First Albany. |
