Nasdaq slump seen as omen
By Adam Shell
USA Today
NEW YORK — Haunted by profit warnings, surging oil prices and unrest in the Middle East, the Nasdaq composite yesterday closed below 1,200 for the first time since 1996, becoming the first major U.S. stock index to fall below this summer's bear market lows.
Bloomberg News
The Nasdaq fell 36 points, or 3 percent, to 1,185, below its Aug. 5 closing low of 1,206. It was the technology-dominated index's lowest close since Sept. 12, 1996, when it ended at 1,165.81. The Dow Jones industrial average lost 114 points to 7,872, 170 points above its July 23 low of 7,702. The Standard & Poor's 500 index, down 1.4 percent to 834, is 4.5 percent above its bear market low of 798.
Crude oil, being traded yesterday at the New York Mercantile Exchange, rose to a 19-month high after Iraq refused to accept any new United Nations resolutions on weapons inspections, raising the chances of a U.S. attack.
The Nasdaq's inability to stay above its prior lows, which Wall Street chart watchers consider an important floor for prices, is an ominous development. The tech-heavy Nasdaq could take another hit today. Late yesterday, John Chambers, the influential CEO of tech bellwether Cisco Systems, told a conference that business conditions are toughening.
Given rising pessimism among investors and the absence of positive short-term catalysts to entice buyers back into the market, experts worry that the Dow and broader S&P 500 may also continue to slump. The causes of yesterday's sell-off were much of the same that have weighed down stocks the past four weeks: signs that the economy and corporate profitability remain sluggish, and rising angst surrounding another potential war with Iraq. Oil prices spiked above $30 a barrel.
With the end of the third quarter approaching, companies continue to confess that profits will fall short of estimates. Wal-Mart, the nation's biggest retailer, and JDS Uniphase joined the growing list of companies warning of slowing sales. Wal-Mart fell 3.8 percent to $52.60. JDS fell 12.6 percent to $1.87.
The weakness in stocks gave bonds a boost, as investors flocked to safer investments. The yield on the 10-year Treasury fell to 3.68 percent. Woody Dorsey, an expert in behavioral finance, says the current bout of "equiphobia" won't end until stocks become even cheaper or there's a positive change for the economy.
