Posted at 11:49 a.m., Thursday, July 25, 2002
Wall Street rally evaporates
By Amy Baldwin
The slippage wasn't surprising in a market still uneasy after nine weeks of declines that claimed a quarter of the market's value. And analysts were encouraged that the market did not fall harder.
"After such a huge rally, you have to expect the market to vacillate over the next few days. The reason for that is the question of capitulation is still unanswered whether we have reached the bottom or not," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. "It is going to take time to reverse negative market sentiment and restore confidence back to the marketplace."
The Dow closed down 4.98, or 0.1 percent, at 8,186.31, having risen and fallen as much as 118 points earlier.
The Dow spiked nearly 490 points yesterday following the arrest of Adelphia Communications executives for allegedly stealing from the cable TV company and an agreement between House and Senate negotiators on legislation to create tougher penalties for corporate fraud.
The broader market was also lower today. The Nasdaq composite index fell 50.11, or 3.9 percent, to 1,240.12, after a 61-point surge yesterday.
The Standard & Poor's 500 index fell 4.75, or 0.6 percent, to 838.68, following a 45-point gain the previous session.
Many analysts believe yesterday's rally was the kind of snapback the market needed after more than two months of declines that saw most stocks fall back to levels not seen since 1997.
"We have had a huge bounce, but it is going to take some time for the market to work through this tremendous volatility," said Scott Bleier, president of Hybridinvestors.com.
Bleier said he expects the market to endure more downturns but said most of the damage is over, and that the market has greater upside potential.
"It might be a time when investors can invest in stocks again because they are reasonably priced, rather than buy stocks simply because they are going up. That has been difficult to do, because stocks were so expensive."
AOL fell $1.76 to $9.64, after acknowledging that federal regulators are looking into how it accounted for several transactions that were reported last week.
The tech sector was hurt by chip stocks after Taiwan Semiconductor said while second-quarter profits rose sharply, it expects weaker demand in the third quarter. Taiwan Semiconductor fell $2.06 to $9.08.
Chip maker Intel fell $1.22 to $17.48, and chip equipment maker Applied Material tumbled $2.32 to $14.23.
Investors were disheartened by a drop in orders to U.S. factories for big-ticket items. The Commerce Department reported that orders fell 3.8 percent in June, well short of the 0.5 percent increase that analysts were expecting.
Major manufacturers traded lower on the economic news. General Motors fell 83 cents to $43.92, and Whirlpool declined 34 cents to $54.91.
But better-than-expected earnings created some winners. Bausch & Lomb climbed $2.72 to $31.68 after reporting earnings that were 5 cents a share higher than analysts were anticipating.
McGraw Hill surged $4.21 to $57.46 on earnings that beat forecasts by 3 cents a share.
Good news about workers' wage and about new home sales also gave the market some support.
The Labor Department said U.S. workers' wages and benefits grew by 1 percent in the second quarter, while the Commerce Department said sales of new homes rose by 0.5 percent in June, well ahead of the 4.7 percent decline analysts were expecting.
Advancers led decliners about 9 to 7 on the New York Stock Exchange where volume was moderate.
On the Nasdaq, decliners outnumbered advancers 6 to 5.
The Russell 2000 index, which tracks smaller company stocks, fell 0.44, or 0.2 percent, to 378.12.
Japan's Nikkei stock average finished off 0.2 percent. France's CAC-40 rose 4.2 percent, Britain's FTSE 100 soared 5 percent, and Germany's DAX index fell 3.1 percent.