- NEW YORK (Reuters) - Stocks
spun lower on Tuesday, with the broad market suffering its worst decline
in nearly a year, after weak U.S. manufacturing data whipped up fears a
tepid economic rebound will crimp corporate profits.
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- The Standard & Poor's 500 index .SPX chalked up its
biggest one-day percentage drop -- down 4.15 percent -- since the market
reopened after the Sept. 11 attacks. The harrowing decline made investors
question whether Wall Street will keep crawling back from 5-year lows struck
in July.
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- "It's a broken record of concerns about the economy,
taking down earnings numbers," and corporate governance issues, said
Peter Gottlieb, portfolio manager at First Albany Asset Management. "At
the beginning of August, we had some sense that we had established a bottom,
but now the market doesn't seem so sure."
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- Indeed, the market got off to a bad start in September,
historically the worst month for stocks with an average fall of 0.4 percent
in the last 50 years. New evidence that the expansion in the U.S. factory
sector may have stalled sent investors scrambling out of stocks, fearful
that poor prospects for corporate profits could knock the wind out of Wall
Street's recent rally.
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- Intel Corp. INTC.O sank 5 percent after a bearish call
ahead of the company's financial update due on Thursday, and Citigroup
C.N slumped more than 10 percent after an investment house cut the banking
giant to a rare "sell" rating as lawmakers take a closer look
at the company's corporate governance.
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- The broad Standard & Poor's 500 index .SPX slumped
38.18 points, or 4.15 percent, to 878.02, according to the latest available
figures. It was the index's biggest percentage drop since it plunged 4.92
percent on Sept. 17, 2001.
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- The blue-chip Dow Jones industrial average .DJI sank
355.45 points, or 4.1 percent, to 8,308.05, while the technology-laced
Nasdaq Composite Index .IXIC surrendered 51.01 points, or 3.88 percent,
to 1,263.84.
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- The Institute for Supply Management's closely watched
index of factory business conditions was unchanged in August at 50.5, posting
a seventh month of growth but missing expectations for a rise to 51.6.
New orders, a key source of future growth, fell for the first time since
last November.
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- "That's a real big letdown for the few folks who
were becoming bullish," said Charles Payne, market analyst at Wall
Street Strategies.
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- Skittish investors flocked to traditional havens such
as U.S. Treasuries and gold stocks, and the dollar weakened as sharp declines
in world stock markets and the weak U.S. data raised the specter of diminished
capital flows to the United States.
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- While stocks may have looked cheap enough to lure investors
when they hit multiyear lows in late July, prices seem far less seductive
since the market's late-summer rally -- especially as analysts race to
reduce their earnings estimates.
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- "The mood is very defensive. It's just very cautious,"
said Larry Wachtel, a market analyst at Prudential Securities. "Investors
can't think of anything that will put the market into high gear."
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- Wall Street was closed on Monday for the Labor Day holiday,
while European and Asian markets began the new month with sharp declines.
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- Intel fell 81 cents to $15.86, weighing on the Dow and
Nasdaq. Investment house Lehman Brothers lowered its third-quarter revenue
forecast for the world's No. 1 semiconductor maker ahead of the company's
update due on Thursday, citing poor demand and the lack of future orders.
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- Major chip suppliers including Intel, LSI Logic Corp.
LSI.N and others are hosting mid-quarter financial updates over the next
week. Several are expected to moderate their growth expectations for 2002.
The Philadelphia Stock Exchange semiconductor index .SOXX dropped 5.1 percent.
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- Citigroup slumped $3.36 to $29.39, ranking as the largest
percentage loser on the Dow. Investors are worried about a widening probe
into how the financial services giant allocated shares of initial public
offerings.
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- Also on Tuesday Prudential Securities downgraded Citigroup
shares to "sell," a rare rating on Wall Street, on concerns about
lower earnings and legal risk as lawmakers take a closer look at the company's
corporate governance.
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- Chartered Semiconductor Manufacturing Ltd. CHRT.O tumbled
$2.79, or 23.5 percent, to $9.06. Investment bank JP Morgan downgraded
the world's third-largest contract maker of microchips to market underperformer
from market performer after the company announced a $633 million fund raising
plan.
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- International Business Machines Corp. IBM.N fell $3.03
to $72.35, a drop of 4 percent. About 4,000 people are likely to lose their
jobs as IBM completes its acquisition of PricewaterhouseCoopers LLC's consulting
arm, the Wall Street Journal reported.
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- A patchy pile of economic data in recent weeks has helped
erode hopes for a strong rebound in soggy corporate profits, and Wall Street
analysts are rapidly ratcheting down earnings estimates.
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- Analysts now expect operating earnings at S&P 500
companies to rise 11.2 percent on average in the third quarter, according
to Thomson First Call. While that is hardly a dour outlook, analysts at
the start of July were expecting an average profit of 16.6 percent.
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- A drop of more than 5 percentage points in just about
two months is a huge move historically, said Joe Cooper, market analyst
at Thomson, who said earnings estimates normally fall about 1 percentage
point a month.
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- "Analysts had been looking for a very rapid recovery
in the second half of this year, kind of the same pattern that we've been
looking at for the last three years," Cooper said. "They are
going to get the recovery this time, but the slope of that recovery is
much gentler than forecast."
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