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The Honolulu Advertiser

Posted at 10:30 a.m., Thursday, August 30, 2001

Dow slips below 10,000

Hawai'i Stocks
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Associated Press

NEW YORK — The Dow Jones industrials fell below 10,000 for the first time in more than four months today on news of a consumer spending slowdown in July and a revenue warning from Sun Microsystems.

The plunge marked the fourth straight decline for the market and came a day after the government reported that second-quarter gross domestic product fell to its weakest level in eight years.

"We've broken through some important psychological levels on the Dow by going below 10,000, and tech stocks are getting whacked," said Bryan Piskorowski, market commentator at Prudential Securities.

"There's a lot of feeling of doom and gloom out there, and the rank-and-file investor is on the sidelines waiting it out."

The Dow, which had already fallen 332 points, or 3.2 percent, the first three days of this week, was off 194.36 at 9,896.54 in late afternoon trading. The last time it closed below 10,000 was April 9, when the index read 9,845.15.

Broader stock indicators also slid, a reflection of widespread selling in technology stocks. The Nasdaq composite index was down 55.69 at 1,787.48, a level also last seen in April, while the Standard & Poor's 500 index was down 21.20 at 1,127.36.

Once again, discouraging economic data helped drag the market lower. The Commerce Department said consumer spending rose just 0.1 percent during July, an unexpectedly weak showing given that Americans began receiving tax rebate checks last month.

The news followed an earlier government report Wednesday that the gross domestic product rose at an annual rate of only 0.2 percent during the second quarter — the weakest showing since the first quarter of 1993.

Indeed, the market responded with selling across the market, with technology issues hit particularly hard.

Sun Microsystems fell $2.35 to $11.08, a nearly 18 percent loss, after announcing late Wednesday it probably will lose money this quarter because demand for its products in Europe and Japan has been softer than expected.

Advanced Micro Devices slipped $1.10 to $13.10 after it said Wednesday afternoon that weaker-than-expected revenues because of weak demand for some of its computer chips.

"There's a complete absence of buyers in the market, so anyone who wants to sell is selling into a vacuum, and it's just not pretty," said Charles G. Crane, strategist at Victory SBSF Capital Management.

However, he said, "The vehemence of the selling is a bit surprising."

Other tech losers included Dow components Intel, down 94 cents at $27.16, and Microsoft, down $3.17 at $57.08, which confirmed that European regulators had widened an antitrust investigation against it.

The Dow was also weighed down by losses in its blue chip components including General Motors, which fell $2.19 to $53.66, and American Express, off $1.30 at $35.70.

The declines were the latest selling in a market that has struggled to rally sustainably since spring. The major stock indexes did manage some strong gains coming into the summer, but a gradual selloff that accelerated this month has wiped out much of the advance.

All three indexes are below where they started the year, although not at their 2001 lows. The Dow is down 8 percent, the Nasdaq 28 percent and the S&P off nearly 15 percent.

Analysts blame the market's dismal performance on investors' growing doubts about when a business recovery will finally occur. With corporate earnings and forecasts continuing to be weak and mixed economic data, stock prices are likely to remain low for a while — giving investors little reason to buy.

"What's weighing on investors' mind is, 'Are consumers pulling out?"' said John Forelli, portfolio manager for the John Hancock Core Value Fund. "People had been focusing on recovery, but now they are wondering if things are going to get any worse."

Declining issues led advancers more than 2 to 1 on the New York Stock Exchange. Volume came to 917.84 million shares, compared with 861.06 million Wednesday at the same point.

The Russell 2000 index was off 7.22 at 466.12.

Stocks overseas also suffered. Japan's Nikkei stock average lost 0.4 percent. Germany's DAX index slipped 2.7 percent, Britain's FT-SE 100 lost 1.6 percent, and France's CAC-40 was off 2.7 percent.