Posted at 11:22 a.m., Wednesday, August 28, 2002
Bad news hammers Wall Street
By Hope Yen
Analysts said the news ranging from job cuts at Nortel Networks to a downbeat brokerage report on Sun Microsystems contributed to the selloff that has followed gains for the past five weeks. Light pre-holiday trading exacerbated the price swings.
"More or less you're looking at a situation where stocks are in for a pause and investors are responding to a more negative tint on the tape," said Jack Caffrey, vice president and equity strategist for JP Morgan Private Bank.
The Dow Jones industrial average closed down 130.32, or 1.5 percent, at 8,694.09, according to preliminary calculations. That followed a 1.1 percent drop yesterday.
The broader market also finished lower. The Nasdaq composite index declined 33.40, or 2.5 percent, to 1,314.38, having fallen 3.2 percent yesterday, the worst one-day drop in three weeks.
The Standard & Poor's 500 index fell 16.95, or 1.8 percent, to 917.87, following a loss of 1.4 percent a day earlier.
Analysts said investors are generally feeling better now that corporate accounting scandals appear to be fading, and are trying to key in on any solid evidence showing the economic recovery has not stalled.
But analysts said bursts of profit-taking like today's are expected, given Wall Street's recent gains as well as the lack of any significant good news. Since the July 23 closing low of 7,702.34, the Dow is up about 1,000 points.
Light volume, as many investors take the week off before the Labor Day weekend, is also creating uneven trading.
"Pre-holiday weeks do tend to be a tad jumpy since someone showing up with a large order to buy or sell can find themselves in a vacuum," said Charles G. Crane, strategist for Victory SBSF Capital Management.
"But I don't see anything in the immediate horizon that's going to strongly influence the market one way or another," he said.
Several tech companies continued to decline today, with Semtech falling $4.87, or 25.7 percent, to $14.05 after reporting it was seeking to resolve a customer dispute over whether its integrated circuit caused some product failures. Two brokerages also downgraded its stock.
Nortel dropped 19 cents to $1.04 after announcing it would cut 7,000 jobs and lowering its third-quarter revenue outlook. Sun Microsystems fell 28 cents to $3.96 after Goldman Sachs said it didn't expect the company to meet estimates.
UAL shares plunged 61 cents to $3.28 on fears its United Airlines unit may declare Ch. 11 bankruptcy.
Gainers included Philip Morris, which climbed $1.41 to $49.31, after the tobacco-food giant raised its quarterly dividend and named CEO Louis Camilleri chairman to replace Geoffrey Bible.
Declining issues outnumbered advancers about 5 to 2 on the New York Stock Exchange. Volume was light.
The Russell 2000 index, the barometer of smaller company stocks, fell 8.07, or 2 percent, to 389.38.