September hits stocks hard
By Hope Yen
Associated Press
NEW YORK — As Wall Street stumbles toward the month's end, September is living up to its historical promise of being the year's worst time for stocks. And it appears likely that relief won't come until November at the earliest.
Blue chip and tech stocks hit four- and six-year lows last week on a spate of earnings warnings as well as growing fears about a war with Iraq. But October might not see much improvement as war concerns remain and companies issue their third-quarter earnings reports.
Indeed, some analysts believe October, known as the "jinx month" because of market crashes in 1929 and 1987, could live up to its historical role of creating new lows for the market.
"We've had a lot of negative news with the earnings preannouncements. The question now is whether the preannouncements are accurate or not," said Richard A. Dickson, a technical analyst at Hilliard Lyons in Louisville, Ky.
Given the recent slate of bad news, "chances are probably best for some negative surprise rather than a positive surprise in the next month. Perhaps that's what will give us a bottom in the market," he said.
The market's three main gauges posted their fifth straight weekly decline on Friday, a distinction not seen since the five weeks ending May 24 to June 21, and they were also headed toward a sixth consecutive month of losses.
The selling got so bad that on Tuesday, the Dow hit a four-year record low, and the Nasdaq dropped to its lowest levels in six years.
At the present levels, this month's trading, which finishes tomorrow, would represent the worst monthly decline this year, even greater than June's 6.9 percent drop and July's 5.5 percent decline.
It also is shaping up to be one of the worst Septembers since 1950, according to Dickson, perhaps even worse than last year, when blue chips fell about 11 percent during the month of the terrorist attacks.
The declines this month weren't surprising given the flurry of negative news. In the past week, companies from tobacco and food giant Philip Morris to telecommunications equipment maker Nortel Networks lowered their profit outlooks.
Investor confidence has tumbled, while war talk has grown. Since Aug. 22, blue chips have fallen more than 1,300 points on increased investor pessimism, and the Federal Reserve on Tuesday cited "geopolitical risks," such as war, as a considerable uncertainty affecting the recovery.
"The economy is not a set of numbers and statistics; it's made of people like you and me," said Alan Skrainka, chief market strategist at Edward Jones in St. Louis. "People act on how they feel. And by and large, investors feel pretty anxious."
That anxiety is certain to increase in the coming week, when the first measures of the economy's performance during September — an assessment of manufacturing from the nation's purchasing manager and the government's employment report — are released.
Still, while analysts don't expect a steady stream of good news anytime soon, they don't discount the possibility of a sustained rally near the end of October or later, depending in part on how the United States resolves growing tensions with Saddam Hussein.
That's because October is also known as a "bear killer" for turning the market's tide in nine post-World War II bear markets. The end of the year also historically sees gains because of a flow of money into the markets from dividend and interest payments as well as some year-end bonuses.
And investor confidence typically starts to rebuild not on good news, but on a prolonged market rally prompted by a strong wave of bargain hunting.
"What you have to understand is that bad news is associated with lower stock prices, while good news is associated with higher stock prices," Skrainka said.
"If you wait for the good news, all you will really accomplish is that you'll buy in at higher prices."
For the week, the Dow lost 284.57, or 3.6 percent, after dropping 295.67 Friday. The Dow closed the week at 7,701.45.
The Nasdaq composite index had a weekly decline of 21.93, or 1.8 percent. On Friday, the Nasdaq dropped 22.45 to 1,199.16.
For the week, the Standard & Poor's 500 index fell 18.02, or 2.1 percent. On Friday, the S&P declined 27.58 to 827.37.
The Russell 2000 index had a weekly loss of 5.50, or 1.5 percent. On Friday, the Russell, which tracks smaller company stocks, fell 8.91 to 361.78.
The Wilshire Associates Equity Index, which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues, ended the week at $7.873 trillion, down $237.83 billion from the previous week. A year ago, the index was $9.563 trillion.
