Terrorism scares away investors

By Lisa Singhania, The Associated Press
Saturday June 22, 2002

Wall Street sustains fifth consecutive losing week 


NEW YORK — Stocks tumbled on yet another spate of bad corporate news and fears of terrorism Friday, giving Wall Street its fifth straight losing week and pulling the major indexes closer to their post-Sept. 11 lows. The Dow Jones industrials suffered their third straight triple-digit loss. 

Investors shrugged off a bullish forecast from Qualcomm, focusing instead on questions about Merck’s accounting and reduced earnings estimates for IBM. Another FBI warning of a possible attack reinforced the market’s pessimism. 

“There’s a total lack of confidence right now,” said John Lynch, chief market analyst, Evergreen Investments. “Earnings, the war on terrorism, the crisis in the Middle East, corporate accountability ... all of this is weighing on investors’ minds and keeping them away.” 

The Dow fell 177.98, or 1.9 percent, to 9,253.79, according to prelminary calculations, its lowest close since Oct. 31 when it was 9075.14. Over the last three sessions it has fallen 452.33. 

Broader stock indicators also fell to their lowest closes since Sept. 21, the end of the first week of trading following the terror attacks. The Standard & Poor’s 500 index lost 17.16, or 1.7 percent, to 989.13, while the Nasdaq composite index fell 23.82, or 1.6 percent, to 1,440.93. 

Market statistics bear out how much stocks have suffered: 

— Over the past the week, the Dow has lost 2.3 percent, the Nasdaq has stumbled 4.2 percent and the S&P is down 1.8 percent. 

— Since May 17, the last time the market had a winning week, the Dow and S&P have each fallen 10.6 percent, while the Nasdaq has lost 17.3 percent. 

— The Nasdaq is just 1.3 percent above its Sept 21 close, and the S&P has 2.4 percent to go. The Dow is in somewhat better shape, standing 12.4 percent above its post-attack low. 

Qualcomm delivered the kind of good news the market has wanted, increasing its third-quarter forecast and citing improved demand for its wireless technology. Its stock rose 21 cents to $26.12. 

But investors ocused on the negative. 

IBM lost $2.83, or almost 4.0 percent, to $68.75 after Lehman Brothers reduced its earnings estimates on the stock. Investors also shunned Merck, sending it down $2.22, or 4.3 percent, to $49.98, following a Wall Street Journal story that questioned its accounting practices. Merck, which denies any wrongdoing, is the latest in a string of companies to come under scrutiny for its bookkeeping. 

And United Technologies tumbled $3.05, or 4.4 percent, to $65.75 after Merrill Lynch downgraded the stock, citing limited growth prospects in the short term. 

All three stocks are Dow components, and their declines contributed significantly to the average’s slide. But other stocks fell too. 

In the tech sector, Cisco Systems tumbled 34 cents to $13.74 and Texas Instruments dropped $1.54 to $22.93. Among blue chips, Target lost $1.05 to $36.80 and Citigroup fell 69 cents to $39.80. 

Also Friday, the FBI warned law enforcement agencies that terrorists might be plotting to use fuel tankers against Jewish neighborhoods and synagogues, according to officials who spoke on grounds of anonymity with The Associated Press. 

Investors have grown increasingly pessimistic about the prospects for a robust recovery. The fear that corporate profits will only improve moderately is keeping many would-be buyers on the sidelines. 

That lack of confidence has brought the major indexes increasingly closer toward the lows that followed the Sept. 11 terrorist attacks. Second-quarter earnings reports due out next month aren’t expected to be enough by themselves to lure investors back to the market, but analysts are hopeful that third-quarter outlooks will be upbeat enough to encourage investment.