Posted 12 p.m., Wednesday, August 8, 2001
Dismal report on economy sends market tumbling
Advertiser news services
NEW YORK — Stock prices fell sharply today, carrying the Dow Jones industrials down 165 points as mediocre earnings from Cisco Systems and a dismal Federal Reserve report rankled investors already disheartened by the lethargic economy.
The market's drop was the latest evidence stocks remain trapped in a narrow trading range created by negative investor sentiment. They say stock prices won't be able to advance until Wall Street gets some concrete signs that business is truly improving.
"People are waiting for some indication that things are getting better, and so far we haven't seen that," said Robert Streed, portfolio manager of Northern Select Equity Fund.
The Dow closed down 165.24 at 10,293.50, or 1.6 percent, according to preliminary calculations, its lowest close in 11 sessions.
The suffering was even more pronounced in technology, sending the Nasdaq composite index down 61.43 to 1,996.36, a 3 percent loss and its weakest finish since July 10. The Standard & Poor's 500 index slipped 20.87, or 1.7 percent, to 1,183.53.
The selling began early in the session in response to Cisco, which dropped $1.28, or 6.7 percent, to $17.98. The tech bellwether reported earnings late yesterday that were in line with expectations, despite a 25 percent decrease in revenues. But Wall Street was unnerved by comments from Cisco's chief executive that the networking industry has not turned around.
Those comments triggered declines in other technology stocks including Juniper Networks, which fell $2.43 to $23.47, and Ciena, which slipped $3.52 to $30.88.
The losses intensified this afternoon, when the Fed released reports from its 12 regional banks that depicted an economy in the grips of "slow growth or lateral movement" with sluggish retail sales and further declines in manufacturing.
The Fed survey, known as the beige book for the color of its cover, will be used when the central bank next meets Aug. 21 to determine interest rates. Although the central bank is expected to lower rates in what would be the seventh such move of the year, the reduction isn't expected to revive the markets.
So far the cuts have failed to stimulate economic growth and boost corporate profits.
"Business is still tough in a lot of areas," said Holly Stark, director of trading at Kern Capital Management. "Some people aren't looking for a recovery in the third and fourth quarters, they're now looking for 2002."
Plunging corporate profits have sent the S&P 500 down 9.2 percent in 2001, while the Nasdaq has fallen 19 percent, 61 percent below its March 2000 record.
Second-quarter earnings for S&P 500 companies have fallen 16 percent from a year ago, with 453 of the index's members reporting, according to Thomson Financial/First Call. Profits aren't expected to rise again until the first quarter of 2002, when analysts predict a 9.9 percent gain.
"There's no direction in the market," said Matt Brown, head of equity management at Wilmington Trust. "It's still too soon to say the market's ready to move significantly higher. We're going to stay in a trading range until we feel and see the Fed interest rate cuts working, and that hasn't happened yet."
Decliners in the Dow included General Electric, down $1.12 at $41.65, and AT&T, off 59 cents at $19.58.
Retailers enjoyed some success. Lands' End rose $1.74, or 5 percent, to $36.90 after reporting better-than-expected results.
Declining issues narrowly led advancers on the New York Stock Exchange. Volume was 1.10 billion shares, compared with 977.04 billion yesterday.
The Russell 2000 slipped 7.85 to 472.48.
