- NEW YORK (Reuters)
- Stocks tumbled on Friday, plunging the Dow Jones industrial average to
lows last seen in 1998 as troubles at drug giant Johnson & Johnson
and tech heavyweight Sun Microsystems Inc. sent investors fleeing.
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- "The mood is just horrible. There is one crisis
after another," said Mike Driscoll, listed trader at Bear Stearns.
"Anything people can point to as a negative they are jumping all over
it."
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- A slew of corporate scandals and dim prospects for earnings
have eaten away at the confidence of stock investors, who scrambled out
of the market and helped make it the busiest day ever for the New York
Stock Exchange.
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- The blue-chip Dow tumbled well below the trough it dug
out in September 2001, when the Sept. 11 attacks on the United States sent
the market spiraling lower.
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- The Dow has fallen every session but one in the past
two weeks, falling 14 percent, as Wall Street pros question the outlook
for company profits amid widening corporate scandals. Other major market
gauges also are floundering at multiyear lows.
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- Since the July 4 holiday, some $1.5 trillion in investor
wealth has evaporated from the stock market, based on the Wilshire 5000
Total Market Index .
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- Investors who had hoped second-quarter earnings would
bring brighter forecasts have been disappointed as a slew of companies
have warned that the outlook for corporate profits remains dim. More than
half of the companies in the Standard & Poor's 500 have now reported
results.
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- "There's nothing but bad news out there, and when
you see the cornerstones of the tech market, like Sun Microsystems, trading
below $5, it really takes the wind out of your sails," said Matt Holscher,
head of Nasdaq trading for WR Hambrecht & Co. "It's water torture.
It's brutal."
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- The Dow sank 390.23 points, or 4.64 percent, at 8,019.26,
according to the latest available figures. The decline took the blue-chip
average to its lowest close since October 1998 and gave it the seventh-largest
points decline in its history.
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- The broader Standard & Poor's 500 Index lost 33.81
points, or 3.84 percent, to 847.75. The tech-laced Nasdaq Composite Index
fell 37.88 points, or 2.79 percent, at 1,319.07, to its lowest close since
May 1997.
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- Stocks steadied themselves in after-hours trading, as
investors digested the market's massive drop before heading home for the
weekend. The Nasdaq-100 After Hours Indicator ticked up 0.03 percent.
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- "Money managers are getting calls saying, 'Just
liquidate my holdings. Raise cash,"' said Will Muggia, manager of
the Touchstone Emerging Growth Fund. "Part of the fear is that there's
no place to hide. People are selling everything that hasn't gone down yet."
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- For the week, the Dow was down 7.8 percent, the Nasdaq
slumped 4 percent and the S&P 500 slid 8 percent.
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- Declining stocks trounced advancers by a ratio of roughly
3 to 1 on the New York Stock Exchange and 5 to 2 on the Nasdaq. More than
2.63 billion shares changed hands on the Big Board and more than 2.37 billion
on Nasdaq.
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- "The outlook is still not good," said Muggia.
"Earnings may have bottomed, but there's no palpable sign of an uptick
yet. Investors are waiting for capital spending and information technology
spending to increase and they haven't seen it."
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- As a result, investors have been yanking cash out of
mutual funds, worried that stock declines will further slice into personal
wealth and retirement savings.
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- Domestic equity funds have seen net redemptions for seven
consecutive weeks, including a whopping $10.7 billion outflow in the last
week, according to Banc of America Securities.
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- Johnson & Johnson was the talk of Wall Street after
the drugmaker confirmed federal regulators are probing allegations of fraudulent
record-keeping at a Puerto Rico plant that makes an anemia drug, one of
the company's best-selling medicines.
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- The stock ranked as the biggest loser in the Dow average,
sinking almost 16 percent, or $7.88, to $41.85.
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- Sun Microsystems was another sore spot. The computer
maker reported its first quarterly profit in a year, but forecast another
loss as it fights for deals in the midst of the technology downturn. Shares
tumbled more than a quarter of their value, or $1.55, to $4.25 after having
scraped out a fresh year low of $4.19 earlier.
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- Still, some see the sharp declines as based on widespread
panic rather than underlying fundamental weakness.
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- "The crowd psychology has turned from wildly euphoric
to the mirror image of that," said A.C. Moore, chief investment strategist
at Dunvegan Associates. "I'm not sure it's really responsible to attribute
(the drop in the last 10 days) to immediate external events such as company
guidance. Just as 1999 and early 2000 were selling opportunities, this
is a buying spot."
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- "Most of the earnings that are coming out in technology
are basically hitting the numbers, coming in-line, but the guidance is
being revised down," said Jack Francis, senior Nasdaq trader at UBS
Warburg.
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- AOL Time Warner Inc. fell almost 7 percent as Wall Street
sought clarity after a management shake-up that included the resignation
of No. 2 executive Robert Pittman three months after he was chosen to revive
its struggling online unit.
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- Shares slid 87 cents to $11.58.
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- Microsoft Corp., the world's largest software maker,
fell $1.55 to $49.56, weighing on the Dow and the Nasdaq. The company scaled
back its profit and sales outlook for the current year, and said growth
was more likely to come later in the fiscal year.
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- U.S. Treasuries firmed and gold prices rallied as investors
fled to safe havens. The dollar sank to a new 2-1/2 year low versus the
euro and slid toward a 17-month nadir against the yen as equity markets
fell and the U.S. trade gap set a record in May for a second straight month
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- Still, some see the recent sharp declines as sure signs
the market is scraping out a bottom.
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- "The public has lost faith in market, but I'm getting
more bullish -- there have been seven weeks in row of equity mutual fund
redemptions, which is a sign of capitulation selling," said Muggia.
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