Market can't chase blues

By Amy Baldwin
Associated Press

Stocks tumbled on yet another spate of bad corporate news and fears of terrorism yesterday, giving Wall Street its fifth straight losing week and pulling the major indexes closer to their post-Sept. 11 lows.

The market's losses over the past five weeks have been stunning, with the major indicators falling by double-digit percentages, and the Nasdaq composite and Standard & Poor's 500 indexes dropping to levels not seen since the post-Sept. 11 lows.

The Dow fell 177.98, or 1.9 percent, to 9,253.79 yesterday, according to preliminary calculations, its lowest close since Oct. 31 when it was 9,075.14. Over the past three sessions it has fallen 452.33.

Broader stock indicators dropped to their lowest closes since Sept. 21, the end of the first week of trading following the terrorist attacks. The Standard & Poor's 500 index lost 17.15, or 1.7 percent, to 989.14, while the Nasdaq composite index fell 23.79, or 1.6 percent, to 1,440.96.

While concerns about terrorism still haunt investors, the greater influence on trading is the fact that the market is in the throes of one of its most anxiety-producing periods — warnings season.

Judging by the market's steep losses and what some companies have already said about their second-quarter results, trading is likely to remain turbulent in the coming weeks.

"I am looking for a few days when everyone just gives up," said Al Mirman, strategist at V Finance in Sarasota, Fla.

The market is likely to have some blips upward when some companies issue upbeat second-quarter forecasts, as McDonald's and Qualcomm did this past week. But analysts expect to see losses similar to the declines the market suffered when companies including Apple Computer and Ciena issued warnings, and when Lehman Brothers reduced its earnings estimates for IBM.

"I don't think anyone I have talked with has been especially optimistic. ... I think investors, in general, are waiting to see what the second quarter looked like," said Peter DiTeresa, senior fund analyst for Morningstar, a Chicago-based research and investor services company.

Or more simply put: "It's a show-me market," said Michael Murphy, head trader at Wachovia Securities.

The protracted decline has left the Nasdaq just

1.3 percent away from the low it reached Sept. 21, and the S&P 500 2.4 percent away. The Dow Jones industrial average is holding up better, standing 12.4 percent above its low.

The market's big drop looks bad, but there's a contrarian viewpoint that suggests it might be exactly what stocks need. The theory is that a sharp selloff over the course of several days might give the market a bottom to work up from and would provide investors with cash to reinvest.

Many on Wall Street believe that what's kept the market from really reaching its lows is its resiliency. Days of steep declines have been followed by rallies, such as Monday's 213-point surge in the Dow industrials.

"What we need are a couple of days of a really bad market when everyone gives up. People have to realize their portfolios are composed of the wrong stocks," Mirman said, adding that investors are still too heavily invested in tech issues and too little invested in safer blue chips.

"This throwing in the towel would give them cash to buy better-performing stocks," Mirman said. "That is what really has to happen."