NEW YORK (CNNfn) - Another round of profit warnings and job cuts hit Wall Street Thursday, igniting a selloff that sent the Dow Jones industrial average tumbling below 10,000 for the first time in nearly five months.
After falling more than 170 points, the Dow now stands at levels first crossed in early 1999, a year that went on to become among the best on record for stocks.
Those days are gone. The Nasdaq composite index fell nearly 3 percent Thursday and stands more than 64 percent below its all-time high. A broader index, the Standard & Poor's 500 index, has fallen 14.5 percent this year, after a 10 percent decline in 2000.
Blame some of the latest losses on Sun Microsystems, which warned it will not post the profit analysts expected.
Sun shares declined as much as 22 percent. Rival IBM, a Dow member, fell in tandem. Money also fled retail, financial, and industrial stocks, handing Wall Street its fourth straight decline.
"Things aren't getting any better in technology and they may be getting worse," said Rafael Tamargo, director of equity research at Wilmington Trust, with about $24 billion in assets under management.
Thursday's economic data didn't help. Consumer spending slowed to its worst levels in nine months, the government said, while the number of Americans receiving jobless benefits rose to nearly a nine-year high. On Wednesday, the U.S economy expanded at its slowest pace in more than eight years.
In other disappointments, Corning, the fiber-optic equipment maker, and brokerage Charles Schwab both said they are cutting jobs to lower costs amid sinking demand.
The Dow industrials fell 171.32 points, or 1.7 percent, to 9,919.58, while the Nasdaq lost 51.49 points, or 2.8 percent, to end the day at 1,791.68.
The Dow had not closed below 10,000 since April 9, the same day the Nasdaq last finished below 1,800. The Standard & Poor's 500 lost 19.53 points, or 1.7 percent, to end at 1,129.03.
Bulls may take comfort in this: The year's worst levels have so far held. The Dow's lowest close of the year, 9,389.48, came on March 22 while the Nasdaq finished as low as 1,638.80 on April 4.
But some say the bottom has yet to come.
"I don't think that capitulation has happened yet," John Roque, market analyst at Arnhold & S. Bleichroeder, told CNNfn's Market Call.
More stocks fell than rose. On the New York Stock Exchange, declining issues beat advancing ones 2,031 to 1,060 as 1.1 billion shares traded. Nasdaq losers topped winners 2,374 to 1,252 as 1.7 billion shares traded.
In other markets, Treasury securities fell. The dollar fell against the yen and euro.
Sun set
Sun Microsystems (SUNW: down $2.36 to $11.07, Research, Estimates) said it will lose money in the current quarter as demand for computer server systems slows. Wall Street expected a profit.
The losses spread to IBM (IBM: down $3.77 to $100.36, Research, Estimates), which competes with Sun in the server market.
Corning (GLW: down $2.55 to $12.05, Research, Estimates), a maker of fiber-optic cable, said it is cutting 1,000 jobs, bringing total job cuts from the start of the year to 20 percent of its work force.
Rival JDS Uniphase (JDSU: down $0.69 to $6.45, Research, Estimates) tumbled.
Faced with a slowdown in trading volume, brokerage Charles Schwab (SCH: down $0.15 to $12.05, Research, Estimates) said it is paring as many as 2,400 jobs, or 11 percent of its work force.
"It's very hard to stimulate enthusiasm," Robert Stovall, market strategist at Prudential Financial, told CNNfn's Before Hours. "We keep drifting downward."
The latest government data on the job market showed that new claims for unemployment benefits fell slightly last week while those drawing unemployment benefits for more than a week rose to their highest level in nearly nine years.
Separately, personal spending rose 0.1 percent in July, its weakest levels since October. Personal income jumped 0.5 percent, but the gains were boosted by the tax rebate checks being mailed to millions of Americans.
Microsoft (MSFT: down $3.31 to $56.94, Research, Estimates) may face new antitrust problems overseas. The European Commission said it believes the company may be using illegal practices to extend its dominance of personal computer operating systems to the market for software used on network servers.
Stocks have fallen every day this week amid a string of weak economic news on consumer confidence, home sales and growth.
Deja vu
The Dow industrials first closed above 10,000 on April 7, 1999. Less than five weeks later, the blue chips sprinted to 11,000 and rose above 11,700 in early 2000.
But the Dow's slide since then pales compared to the Nasdaq's. Topping 5,000 in March of last year, the tech-heavy index had declined nearly 68 percent at one point in April.
The Federal Reserve cut interest rates seven times this year to keep the economy from recession. But cheaper borrowing costs have not stemmed the gloomy corporate forecasts.
"Fed cuts aren't it any more," said Wilmington Trust's Tamargo, who is waiting word from business that their outlooks finally are improving.
Advanced Micro Devices (AMD: down $0.91 to $13.29, Research, Estimates) offered no such optimism. The chipmaker, which is waging a price war with Intel, said third-quarter sales will fall short of forecasts.
Investors fled for the safety of consumer products makers, whose profits are less tied to the gyrations of the economy.
Coca-Cola (KO: up $1.09 to $48.79, Research, Estimates), Procter & Gamble (PG: up $0.57 to $74.59, Research, Estimates) and Philip Morris (MO: up $0.71 to $47.94, Research, Estimates) all rose, keeping the Dow industrials from steeper losses. But the most economically sensitive stocks on the Dow fell, including General Motors (GM: down $1.64 to $54.21, Research, Estimates), Caterpillar (CAT: down $1.17 to $50.00, Research, Estimates) and 3M (MMM: down $2.55 to $104.20, Research, Estimates). 
Click here to send mail to Staff Writer Jake Ulick
|
