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Markets & Stocks
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Bush talks, stocks fall
Weak techs, selling in drug sector knock markets lower as investors shrug off president's speech.
July 9, 2002: 6:07 PM EDT
By Alexandra Twin, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Stocks tumbled Tuesday as weakness in key tech issues and a sharp drop in drugmaker Wyeth eclipsed any optimism that may have stemmed from President Bush's midday speech on corporate responsibility.

"People would have liked to see the market rally today after the president's speech, but the market is too negative right now, and it's going to continue to be that way for the foreseeable future," Bob McCooey, a trader at the Griswold Company, told CNNfn's Street Sweep.

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The Dow Jones industrial average sank 178.81 points, or nearly 2 percent, to 9,096.09. The Nasdaq composite index fell 24.49, or 1.7 percent, to 1,381.12, and the Standard & Poor's 500 index tumble 24.15 to 952.83, a loss of 2.5 percent.

Stocks rallied as Bush began speaking but the gains quickly evaporated, reflecting the market's recent weakness and investors' mixed reaction, at best, to the speech, said Donald Selkin, director of research at Joseph Stevens.

"There's an internal conflict as Bush tries to satisfy two different constituencies," Selkin said. "The public finds reassurance in government taking a harsher stance, but big business is a little conflicted in that it traditionally doesn't want government putting too many regulations on it."

At the same time, some money managers said Bush's proposals would only accomplish so much, and that tougher actions against crooked executives were what was needed.

"There are a lot of factors at play. There is uncertainty about the measures that Bush may take, there's a lack of earnings in the pipeline, there's weakness in the drug sector and chip downgrades" by industry analysts, said Matt Ruane, director of listed trading at Gerard Klauer Mattison. "People are waiting for the next shoe to drop."

"I am calling for a new ethic in corporate responsibility," Bush said. "My administration will do everything in its power to end the days of cooking the books, shading the truth and breaking our laws." He also proposed stronger criminal penalties for financial fraud, among other reforms.

Selling in chips and other tech stocks followed a series of bearish brokerage notes, while negative results of a study of a key drug produced weakness in pharmaceutical company Wyeth.

Wednesday is expected to bring results from biotech Genentech (DNA: down $2.10 to $27.15, Research, Estimates) and Web media company Yahoo! (YHOO: down $0.18 to $12.71, Research, Estimates). Genentech is expected to have earned 22 cents per share, 15 percent better than the 19 cents per share it earned a year earlier. Yahoo! is forecast to have earned 2 cents a share, doubling its results from a year ago.

Drugmakers and chips dip

Stocks had been weak all day following the latest spate of discouraging corporate news.

Drugmaker Wyeth (WYE: down $11.94 to $37.30, Research, Estimates) knocked down the pharmaceuticals after the company said a study showed that women taking the company's popular hormone replacement drug, Prempro, had an increased risk of developing breast cancer, stroke and heart disease.

Sparking a chip selloff, Salomon Smith Barney cut its stock price target for chipmaker Intel (INTC: down $0.54 to $17.96, Research, Estimates) to $27 from $45. The firm also cut its 2002 and 2003 earnings targets.

Merrill Lynch cut its 2003 earnings estimate for the entire chip-equipment sector, citing a slower growth forecast from weak personal computer, consumer and information technology spending. Among the specific companies Merrill downgraded and cut estimates for: Applied Materials (AMAT: down $1.27 to $17.73, Research, Estimates), KLA-Tencor (KLAC: down $2.72 to $41.86, Research, Estimates) and Novellus Systems (NVLS: down $2.30 to $28.85, Research, Estimates).

Dell Computer's (DELL: down $0.01 to $24.74, Research, Estimates) chief operating officer said that he sees no uptick in personal computer spending. Yet he also confirmed that the company would meet its previous guidance.

However, countering some of the negativity, Sanford Bernstein said it expects software leader Microsoft (MSFT: up $0.29 to $53.21, Research, Estimates) to beat current fourth-quarter earnings estimates of 42 cents per share.

Corporate governance concerns loom

Regardless of Bush's speech, concerns about corporate accountability continue to distract investors.

Drugmaker and Dow component Merck (MRK: down $2.06 to $45.75, Research, Estimates) declined further after a Friday SEC filing revealed that the company recorded $14 billion in revenue that it didn't collect. In addition, the scandal surrounding telecom WorldCom (WCOME: down $0.02 to $0.21, Research, Estimates) remained prominent as two of the company's former executives exercised their right not to answer question at a House hearing Monday.

"There's still a huge disconnect between the recovering economic factors and the stock action, and corporate governance concerns are a big part of that," said Bryan Piskorowski, market analyst at Prudential Financial.

Another factor in Tuesday's market was a fairly bearish note released by Merrill Lynch chief U.S. strategist Rich Bernstein, in which he raised concerns about the outlook for a profit recovery, saying the firm's checks show that the expectation for improving profit has turned marginally more bearish.

As is often the case with stock selling, U.S. Treasury bonds rallied, pushing the yield on the 10-year note down to 4.72 percent. Light crude oil futures gained 4 cents to $26.09 a barrel, while gold and silver both rallied in a fairly typical flight-to-quality move.

In global trade, European bourses gained while Asian markets closed higher. The dollar continued its decline, weakening versus the euro and the yen.

Market breadth was negative. On the New York Stock Exchange, advancers beat decliners by more than 10-to-7 as 1.34 billion shares changed hands. On the Nasdaq, decliners beat advancers 4-to-3 as 1.67 billion shares traded.  Top of page






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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.