Stocks fall on lackluster economic report

The Associated Press
Thursday August 30, 2001


NEW YORK — Investors sent stocks tumbling Wednesday for a third straight session on a government report showing the economy eked out only a slim gain in the second quarter, its weakest performance in eight years. 

While the economy fared better than expected – some analysts had feared it would be flat or even decline – investors weren’t comforted. After weeks of dismal earnings and negative forecasts from the nation’s biggest companies, Wall Street took the report on the gross domestic product as just another reason not to buy. 

“There is no faith that things are about to improve anytime soon,” said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore. 

Investors were clearly disappointed by the Commerce Department’s report that the GDP – the country’s total output of goods and services – inched up just 0.2 percent in the April-June quarter. 

The resulting selling was spread across the market as frustrated investors stayed away from stocks on worries that business would remain weak for the immediate future. 

Caterpillar fell 97 cents to $51.17, while Gap slipped 60 cents to $19.70 after Banc of America Securities reduced its rating on the retailing stock. 

Pessimistic outlooks from two technology bellwethers intensified the market’s bad mood. 

Chip stocks slipped after Advanced Micro Devices warned that revenue in the current quarter would likely fall about 15 percent from the last quarter, compared to previous projections of 10 to 15 percent losses. AMD fell 66 cents to $14.20, a 4 percent loss. 

Networking stock Nortel Networks fell 25 cents to $6.52 after WorldCom’s announced that it would cut its 2002 capital spending to $6 billion. WorldCom, which fell 53 cents to $12.44, is one of Nortel’s most important customers. 

Also Wednesday, Microsoft lost 45 cents to $60.29 on news that the Justice Department had asked the new judge in its antitrust case against the software company to discuss a schedule for moving the case along. 

There were a few modest winners. Among them was Gateway, which inched up 19 cents to $8.79 after announcing a restructuring plan late Tuesday.  

The computer maker plans to cut 25 percent of its global work force and shutter operations in Asia. 

Women’s clothing retailer Talbots also advanced, rising 89 cents to $37.94. 

But analysts said Wednesday’s session mostly reflected the ambivalence that has come to characterize Wall Street amid unending indications of weak business and a struggling economy. 

All three indexes remain well below where they started 2001: the Dow down 6 percent, the Nasdaq off 25 percent and the S&P off 13 percent.  

And the market’s attempts to rally have fizzled as investors, unconvinced that tough times are over, have cashed in their profits after every advance.  


After months of being burned by stocks that can’t seem to hold their gains, many investors are simply staying out of the market. 

Two announcements after the market closed gave them little incentive to act otherwise. Fiber optics manufacturer Corning said it was cutting 1,000 jobs because of a seen a sudden slowing in orders across all fiber product lines. The stock was down 78 cents, or 5.3 percent, to finish at $13.82 in extended trading, after a regular session loss of 79 cents. 

And Sun Microsystems said it is unlikely it will break even in the first quarter because of soft business. The maker of computer storage and other products dropped 83 cents in the Nasdaq’s late session to finish at $12.60, after a 13-cent decline during the day. 

“We still have just no real reasons for people to be aggressive here,” said Todd Clark, co-head of trading at WR Hambrecht, who also attributed some of the slack to low volume ahead of the Labor Day holiday. 

Declining issues outnumbered advancers nearly 4 to 3 on the New York Stock Exchange. Consolidated volume came to 1.17 billion shares, compared with 1.18 billion Tuesday. 

The Russell 2000 index, which tracks the performance of smaller company stocks, fell 0.86 to 473.34. 

Overseas markets were mixed Wednesday. Japan’s Nikkei stock average finished the day down 1.9 percent. Germany’s DAX index was down nearly 0.1 percent, France’s CAC-40 rose 0.4 percent, and Britain’s FT-SE 100 declined 0.3 percent. 


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