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The Honolulu Advertiser

Posted at 12:19 p.m., Monday, September 30, 2002

Stock market still in freefall

Hawai'i Stocks
Updated Market Chart

By Amy Baldwin
Associated Press

NEW YORK ­ Disappointed by news of frail consumer spending, investors sold stocks sharply lower again today, pulling the Dow Jones industrials down by triple digits for the second-straight session.

The downturn capped another dismal quarter on Wall Street, the worst for the Standard & Poor's 500 index in 15 years. The S&P also endured its worst six-month period in 28 years.

Today's selling also briefly pulled the Dow down as much as 240.67 points and below 7,500.

"The level of investor anxiety has just reared up its ugly head again. It is just totally driven by uncertainty," said Joseph Keating, chief investment officer at AmSouth Asset Management in Birmingham, Ala.

The Dow closed down 109.87, or 1.4 percent, at 7,591.58, according to preliminary calculations. The Dow fell 295 on Friday.

The broader market also sank. The Nasdaq composite index declined 27.23, or 2.3 percent, to 1,171.93, adding to Friday's 22-point loss and falling to its lowest level since Sept. 12, 1996, when it closed at 1,165.81. The Standard & Poor's 500 index fell 12.11, or 1.5 percent, to 815.26, having lost 27 on Friday.

Today marked the end of the third quarter, and the three major indexes recorded big losses. The S&P fell 17.6 percent, its worst quarterly loss since the fourth quarter of 1987 when it slid 23.3 percent. The S&P also ended its worst six month period, down 29 percent, since 1974 when it dropped 32.4 percent in the second and third quarters.

Meanwhile, the Dow had a quarterly decline of 17.9 percent; the Nasdaq, 19.9 percent.

Investors were irked today by discouraging news about consumer spending, which accounts for two-thirds of the economy. First, the Commerce Department reported that consumers increased their spending in August by only 0.3 percent, falling short of analysts' expectations for a 0.5 percent pickup. News that incomes rose by 0.4 percent failed to ease investors' disappointment about spending.

And, Wal-Mart lowered its estimate for September same-store sales, those at stores open at least one year. Wal-Mart, a Dow industrial, fell $2.02 to $49.22.

Federated Department Stores, which also reduced its September forecast, declined $1.74 to $29.43.

"There are still concerns that there has been a ratcheting down on buying intentions by consumers," said Ned Riley, chief investment strategist at State Street Global Advisors in Boston.

Investors were also let down by the Purchasing Management Association of Chicago, which reported that its index of area business activity fell to 48.1 in September. A reading below 50 indicates that business is contracting and this was the first such reading in seven months.

The Chicago index is considered an indicator of the national purchasing managers' report, to be issued tomorrow.

Earnings woes pressured other stocks. Drugstore operator Walgreen dropped $3.14 to $30.75 after missing fiscal fourth-quarter earnings projections by a penny a share.

Bad news aside, analysts attributed some of the declines to technical factors having to do with the end of the quarter. Some of the selling was attributable to investors who had short sales in the market, Riley said. In a short sale transaction, investors borrow stock and sell it on the expectation of a market drop.

"The hedge funds and the shorts would be thrilled if we could end the quarter on another miserable down day. That would enhance their performance and give them another quarter of bragging rights compared with the indexes," Riley said.

Decliners outnumbered advancers 4 to 3 on the New York Stock Exchange where volume was heavy.

The Russell 2000 index, the barometer of smaller company stocks, inched up 0.48, or 0.1 percent, to 362.26.

Overseas, markets fell with Japan's Nikkei stock average closing down 1.5 percent. In Europe, France's CAC-40 dropped 5.9 percent, Britain's FTSE 100 fell 4.8 percent, and Germany's DAX index sank 5.1 percent.