Dow closes below 10,000
By Lisa Singhania
Associated Press
NEW YORK — The Dow Jones industrials closed below 10,000 for the first time in more than four months yesterday after the latest installment of bad economic and corporate news — a government report showing a consumer spending slowdown in July and a revenue warning from Sun Microsystems.
The plunge, the fourth straight decline for the market, came a day after news that the second-quarter gross domestic product was at its weakest level in eight years. Analysts said investors, already disheartened by the market's previous selloffs, are refusing to buy when the prospects for a recovery are so bleak.
"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 closed down 171.32 at 9,919.58, a 1.7 percent loss, after falling as much as 221 points. The blue chip index has fallen 503 points or 4.8 percent so far this week. It last closed below 10,000 on April 9, when the index measured 9,845.15.
Broader stock indicators also slid, a reflection of widespread selling in technology stocks. The Nasdaq composite index dropped 51.49 to 1,791.68, its lowest close since 1,745.71 on April 9, while the Standard & Poor's 500 index lost 19.57 to 1,129.03.
The Nasdaq has fallen 125 points or 6.5 percent since the week started; the S&P has lost nearly 56 points or 4.7 percent during the same time.
Once again, discouraging economic data was the catalyst for a selloff. 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. A day earlier, the government had reported 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.
The market responded with widespread selling. Technology issues were hit particularly hard.
Sun Microsystems fell $2.36 to $11.07, a 52-week low, 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 91 cents to $13.29 after it warned Wednesday of disappointing 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 97 cents at $27.13, and Microsoft, which dropped $3.31 to $56.94 after confirming that European regulators had widened an antitrust investigation against it.
The Dow was also weighed down by losses in General Motors, which fell $1.64 to $54.21, and American Express, off $1.05 at $35.95.
The declines were the latest losses 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 now well below where they started the year, although not at their 2001 lows. The Dow is down 8 percent and the Nasdaq off more than 27 percent, while the S&P has lost more than 14 percent.
Analysts blamed 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.
That pessimism further thwarted any positive reaction to news of the second interest rate cut of the year in Europe, a move expected to help U.S. companies that do business overseas. The U.S. government has already reduced interest rates seven times this year, but so far the cuts have failed to stimulate economic growth.
"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. Consolidated volume came to 1.37 billion shares, up from 1.17 billion Wednesday.
The Russell 2000 index was off 5.28 at 468.06.
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.
