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The Honolulu Advertiser
Posted on: Wednesday, April 4, 2001

Dow closes down 292, Nasdaq down 110

By Lisa Singhania
AP Business Writer

NEW YORK — Wall Street fell back into a deep slump yesterday as a relentless stream of earnings warnings sent the Dow Jones industrials tumbling as much as 350 points and the Nasdaq composite index down more than 100.

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The escalating dispute between the United States and China over a grounded U.S. spy plane added to the market's nervousness.

The Dow recovered from its lows of the day, but still closed down 292.22, or 3.0 percent, at 9,485.71, compounding a 100-point loss Monday.

The Standard & Poor's 500 index slid 39.41, or 3.4 percent, to 1,106.46. The Nasdaq was off 109.97, or 6.2 percent, at 1,673.00, putting it at its lowest point since October 1998.

Yesterday's decline showed that Wall Street is still mired in the pessimism over earnings and the economy that dominated the month of March, pummeling stock prices and sending the Dow briefly into bear market territory. The edginess also reflected nerves about China's demand yesterday that the United States stop surveillance flights after a collision between the U.S. spy plane and a Chinese fighter jet.

"I can't pin this on any one specific event," said Charles G. Crane, strategist for Spears, Benzak, Salomon & Farrell, a division of Key Asset Management. "Certainly, there's concern about what's going on in China. But this mostly is the ongoing reports and worries about what the first quarter is going to look like and how it will set the tone for the rest of the year."

Investors yesterday appeared to brace themselves for this month's first-quarter reports, their anxiety intensified by the latest round of earnings warnings. The markets fell at the beginning of the session and selling accelerated as the day wore on.

Ariba slipped $2.00 to $4.44, a 31 percent decline, in a loss that began late Monday after the business transaction software company reduced its quarterly outlook and said it will cut 700 jobs because of a dropoff in sales. BroadVision, another provider of e-commerce to business, fell $1.53, or 34 percent, to $2.97 after lowering its quarterly expectations, citing sluggish demand.

These companies joined a variety of other businesses, including high-tech concerns and blue chip stalwarts such as American Express and Procter & Gamble, that have warned of disappointing earnings this year.

"It's the continued earnings surprises on the downside," said Matt Brown, head of equity management for Wilmington Trust. "What hurts even more is the outlook — right now there's no visibility as to when this economy is going to turn around."

Technology losses helped pull the Dow lower, as well. IBM fell $4.27 to $90.39, while Hewlett-Packard lost $1.51 to $27.41.

Investors also punished U.S. automakers, which reported domestic sales in March fell by 9 percent. General Motors dropped $1.10 to $50.93.

Even Dow stocks usually popular with investors in uncertain economic times suffered. Philip Morris fell $1.68 to $44.51, while Merck slid $1.44 to $72.81.

Market watchers said the lack of any reason to buy was further depressing stocks. The Federal Reserve isn't expected to cut interest rates for another month and investors are worried stock prices will fall futher when earnings reports start.

Then there is the issue of income taxes, which are due April 16.

"It's just seasonally a time where investment decreases in financial markets owing to the need of cash tax payment," said A.C. Moore, chief investment strategist for Dunvegan Associates.

The Dow is now down 19 percent from its closing high of 11,722.98 reached in January 2000, while the Nasdaq is off nearly 67 percent from off its March 2000 peak of 5,048.62. The S&P is down more than 27 percent from its March 2000 high of 1,527.46.

Analysts have stopped predicting when stocks are going to stop falling, instead telling investors that the market recovery will be gradual. Nearly all agree the market is oversold and say the market — and investors' — psychology will have to improve before stocks prices do.

"A year ago, exuberance and greed masked a whole lot of risk," said Crane, the Spears, Benzak, Salomon & Farrell strategist. "Now, desperation and fear are masking a whole lot of opportunity. An investor would be wise to pay heed to that."

Declining issues outnumbered advancers more than 3 to 1 on the New York Stock Exchange. Consolidated volume came to 1.62 billion shares, compared with 1.25 billion Monday.

The Russell 2000 index dropped 12.80 to 426.96.

Overseas, Japan's Nikkei stock average rose 1.4 percent. European markets were mainly lower, however. Germany's DAX index fell 3.6 percent, Britain's FT-SE 100 closed down 2.8 percent, and France's CAC-40 slipped nearly 4.0 percent.