DJ: US Stocks Sink On Strong Volume; Is Capitulation Close?
07/15/2002
Dow Jones News Services
(Copyright © 2002 Dow Jones & Company, Inc.)
By Shaheen Pasha
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--U.S. stocks continue to take a beating with the Dow Jones Industrial Average hovering unnervingly near its Sept. 21 closing low of 8235.81.
That might not necessarily be a bad thing, some market watchers say, as a final selloff to those depressed levels may indicate a bottom from which to climb higher. In the meantime, many market players are pointing the finger at a weak dollar to account for Monday's market selloff. Others say the dollar is little more than a scapegoat for a market desperate to sell on any bad news. In either case, equities are getting hammered.
"The dollar is today's disaster d'jour with the market spooked that foreign investors may be leaving our shores and going somewhere else," said Art Hogan, chief market strategist at Jefferies & Co. "It's not a new issue and there are some good parts to the weakening dollar, specifically for multinationals," but for now the jittery market is looking for the downside.
The Dow Jones Industrial Average is down 397, or 4.58%, to 8287, the Nasdaq Composite is off 49, or 3.6%, to 1324, and the Standard & Poor's 500 Index has lost 40, or 4.38%, to 881.
As for small caps, the Russell 2000 Index has shed 15.19, or 3.68%, to 398.09 and the Standard & Poor's SmallCap 600 Index has dropped 8.61, or 4.13%, to 199.72.
Hogan added that volume remains strong for the indexes, which is a plus for those looking for capitulation. If the markets manage to finish down sharply lower than its current levels on strong volume, it could mean a bottom has been reached or is close, he speculated.
There are no sectors among the 86 Dow Jones groups that are in the green. Precious metals are faring slightly better with small-cap Meridian Gold up 6 cents, or 0.3%, to 17.52 but large-cap Newmont Mining has shed 23 cents, or 0.8%, to 28.31. Comex August gold futures had pressed to nine-day highs of $319.90 per ounce earlier Monday spurred on by the drop in the U.S. dollar against the euro, which has seen the euro climb to 29-month highs and parity against the greenback.
All 30 Dow Jones industrials are in negative territory. Even Home Depot. which had been slightly higher after the company said it sees 18% to 20% net earnings growth and 15% to 18% revenue growth through 2004. has succumbed to weakness. The home improvement goods retailer, whose board approved a share repurchase program of up to $2 billion, also said it is comfortable with a consensus second-quarter earnings forecast of 47 cents a share. Still, the stock is off 2 cents, or 0.1%, to 29.05.
Pharmaceuticals are weak with Pfizer down 4.06, or 12.6%, to 28.13 after the company said it acquired Pharmacia for $60 billion in stock. The combined companies will have more than $48 billion in revenue and create the leading pharmaceuticals company in the world. Pharmacia has climbed 6.41, or 19.7%, to 39.
Biotech company Monsanto is also pressured by the news after Pharmacia said it will spin off its 84% stake in the company to current shareholders. Monsanto has shed 1.42, or 8.1%, to 16.15.
Another drug maker, Millennium Pharmaceuticals, has lost 39 cents, or 3.9%, to 9.46 after the company announced that it will discontinue the development of its oral MLN977 program for the treatment of chronic asthma because of findings that the drug was affecting liver function.
Heavy construction stocks are among the weakest performers with Jacobs Engineering Group off 2.13, or 6.5%, to 30.80 and EMCOR Group down 2.778, or 5.3%, to 49.22.
Chemical companies are also trailing lower after Sanford C. Bernstein downgraded a number of companies in the sector, citing the likelihood that other sectors will outperform chemical companies. Among the downgraded stocks, Dow member DuPont has shed 2.95, or 6.8%, to 40.33 while Lyondell Chemical has lost 1.05, or 7.6%, to 12.75. Both stocks were cut to underperform from market perform.
There's some questionable corporate practices driving action on Wall Street. Duke Energy is off 3.54, or 14.3%, to 21.21 after Goldman Sachs and Morgan Stanley both downgraded their ratings on the company amid continuing concerns regarding its trading business. The downgrades come a session after Duke reported that it received a subpeona from federal prosecutors.
El Paso became the latest company to be slapped with a subpeona as federal prosecuters investigate ofsetting trades that inflated revenue and trading volumes. The stock is down 95 cents, or 5.4%, to 16.80.
FleetBoston Financial is under water after the bank swung to a net loss for the second quarter after recording $1 billion in charges for losses in Argentina and for the shutdown of its Robertson Stephens investment-banking unit. Excluding the charges, FleetBoston said it earned $635 million, or 60 cents a share, compared with a consensus estimate of 71 cents a share from analysts surveyed by Thomson First Call. The stock has shed 2.24, or 7.7%, to 26.80.
Volume on the New York Stock Exchange is 1.22 billion shares, with down volume ahead of up, 1.10 billion to 109 million. Decliners are ahead of advancers, 2,748 to 491.
Volume on the Nasdaq is 1.26 billion shares, with down volume outpacing up, 1.04 billion to 787 million. Decliners are ahead of advancers, 2,584 to 787.
-By Shaheen Pasha, Dow Jones Newswires; 201-938-2312 shaheen.pasha@dowjones.com
(END) DOW JONES NEWS 07-15-02
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