Markets returning to reality

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The DOW is now hitting 4 year lows, which is more realistic. considering most of what happened since 98 was hype and delusion. The real bottom should be down around 5,000-6,000, but greedy investors probably won't wait for it to reach its real value.

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Dow Falls 300; Off 1,000 in 6 Days

Mon Jul 15, 2:08 PM ET

By AMY BALDWIN, AP Business Writer

NEW YORK (AP) - The Dow Jones industrial average is off more than 300 points and has fallen more than 1,000 in the past six sessions.

Wall Street's dramatic selloff intensified Monday with despondent investors seeing no reason to buy stocks while they await the release of second-quarter earnings results. The Dow Jones industrials fell more than 330 points, heading for their fifth triple-digit loss in six sessions.

Corporate accounting scandals have spooked investors, making them mistrustful of earnings reports and outlooks for the remainder of the year.

"For lack of a better description, you have as much full-fledged panic as you are going to get," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis. "The negative mentality is as pervasive as I have ever seen it, and I went through (the) '73 and '74" bear market.

In midafternoon trading, the Dow was down 333.53, or 3.8 percent, at 8,351.00, having last week dropped 694.97, or 7.4 percent, in five straight losing sessions. It was the blue chips' largest weekly point decline since Sept. 21, when they dropped 1,369.70 following the terrorist attacks.

The Dow was approaching its Sept. 21 low of 8,235.81. Prior to the terror attacks, the Dow hadn't closed lower since Oct. 14, 1998 when it finished at 7,968.80.

The market's broader indicators, having already fallen through their Sept. 21 lows, also declined sharply Monday. The Nasdaq composite index fell 32.00, or 2.3 percent, to 1,341.50, after last week's loss of 74.86, or 5.2 percent.

The Standard & Poor's 500 index dropped 31.32, or 3.4 percent, to 890.07. The S&P ended last week down 67.64, or 6.8 percent.

Even positive economic news failed to cheer Wall Street Monday when the Commerce Department ( news - web sites) reported businesses raised their inventories by 0.2 percent. The increase, the first since January 2001 and better than the 0.1 percent analysts had expected, indicates companies are confident enough about the economy to increase their stockpiles.

Despite mounting evidence of an economic recovery, investors have been unloading stocks for eight weeks due to unceasing worries about the integrity of corporate accounting and prospects for earnings growth. The major indexes have not finished a week higher since mid-May.

"Just as the markets were driven on the upside by emotion euphoria and greed this market is driven by fear and despair," said Hugh Johnson, chief investment officer at First Albany Corp. "It is not at all unusual for the market to disconnect from the economy and earnings when fear takes hold."

Bookkeeping concerns weighed on Duke Energy, which plunged $3.68 to $21.07 after being downgraded by Morgan Stanley, Salomon Smith Barney and Goldman Sachs. On Thursday, Duke said it had received subpoenas from the Commodity Futures Trading Commission and the Houston office of the U.S. attorney for information related to its trading activities.

Energy company El Paso Corp., which said it received a similar subpoena Friday from the Houston office of the U.S. attorney, declined 87 cents to $16.88.

Disappointing earnings pulled other shares lower. Financial services company Northern Trust fell $1.51 to $38.08 after missing analysts' expectations by a penny a share.

But losses were spread across sectors Monday, indicating investors' lack of confidence in the market as a whole. General Electric declined 84 cents to $27.76, despite reaffirming its yearly earnings outlook last week.

General Motors fell 65 cents to $45.95, after suffering a series of analysts' downgrades last week. Analysts expressed concern about GM's ability to fund its pension plan.

And, Coca-Cola declined 38 cents to $50.67 despite news that it will adjust its accounting to report results more fairly. Coke will begin treating future stock options as employee compensation.

Among gainers, Fannie Mae rose 72 cents $71.35 after beating second-quarter earnings expectations by 3 cents a share.

Declining issues outnumbered advancers slightly more than 5 to 1 on the New York Stock Exchange ( news - web sites). Volume came to 1.15 billion shares, just ahead of the 1.06 billion traded at the same point Friday.

The Russell 2000 index, the barometer of smaller company stocks, fell 12.30, or 3 percent, to 400.98.

Analysts say the dollar, weakening against international currencies, is another drag on the market, and has prompted many foreign investors to exit U.S. equities.

Overseas markets were lower Monday with Japan's Nikkei stock average finishing down 2.1 percent. In Europe, Britain's FTSE 100 and France's CAC-40 each slid 5.4 percent, and in late-day trading Germany's DAX index dropped 4.3 percent.

-- (bubble@almost.deflated), July 15, 2002

Answers

Stocks Set New 5-Year Lows on Jitters Tue Jul 23, 4:55 PM ET

By Haitham Haddadin

NEW YORK (Reuters) - Stocks sank to new 5-year lows on Tuesday in a day of heavy, volatile trading as jitters over tepid corporate profits and fears of more corporate chicanery again slammed Wall Street.

"This is a market that is very jittery," said Peter Coolidge, senior equity trader at Brean Murray & Co. "It's sell now, ask questions later."

Shares of Citigroup Inc. and J.P. Morgan Chase & Co. Inc. tumbled, contributing much of the pressure on the blue-chip Dow average, as the two largest U.S. banking companies faced criticism for transactions involving failed energy trader Enron Corp. .

"We have a continuation of concern over corporate accountability and the fear is now spreading to the major banks, such as Citigroup and J.P. Morgan," said Joe Stocke, portfolio manager at StoneRidge Investment Partners. "And investors are reviewing their mid-year financial statements and in some cases reacting and making changes."

Many experts say the market is oversold, but investors hesitate to jump back in the market after watching their portfolios shrink day after day. From its all-time closing high in March, 2000, the broad S&P 500 Index has fallen 47.7 percent, close to the drop of more than 48 percent in the 1973-74 bear market.

Investors sifted through a mixed bag of reports at the peak of the second-quarter earnings season. Chip gear maker Novellus Systems Inc. lost about 9.5 percent after an 80 percent fall in quarterly profit, but leading tool maker Black & Decker Corp. rose 9.6 percent on higher earnings. Worries over corporate earnings combined in recent weeks with fears of more accounting irregularities to push stocks to multiyear lows.

The market faced another rocky session. The tech-laced Nasdaq Composite Index <.IXIC> lost 53.66 points, or 4.18 percent, to 1,228.98, sinking to levels unseen since April 1997 a day after falling through the 1,300-point psychological barrier. The Standard & Poor's 500 <.SPX> fell 22.15 points, or 2.7 percent, to 797.70, also hitting new 5-year lows.

The Dow Jones Industrial average <.DJI> lost 82.24 points, or 1.06 percent, to 7,702.34, having at times been lifted by some bargain hunting. The blue-chip gauge suffered its first close under the 8,000 level since mid-October 1998 on Monday.

Citigroup dropped 15.7 percent, or $5.04 to $27 and J.P. Morgan fell 18 percent, or $4.44 to $20.08. Concerns grew the two firms may have peddled the type of disguised loans used by Enron to other firms.

Losers outpaced winners by a ratio of about 5 to 1 on the New York Stock Exchange ( news - web sites) and 3 to 1 on the Nasdaq. More than 2.4 billion shares changed hands on the Big Board and 2.58 billion shares were traded on Nasdaq. Volume has soared in recent days as investors ditched stocks.

More than $8 trillion in wealth has been wiped out, based on declines from all-time highs reached in early 2000 in the Wilshire 5000 <.TMW>, the gauge that lists all U.S. stocks.

If history is any guide, sharp rallies, albeit at times brief ones, follow periods of extreme stock market volatility and decline. Such rallies include ones that took place after the 1997 Asian crisis, the 1998 Russian debt default and the LTCM hedge fund collapse, as well as the sharply advance in the wake of September 2001 panic sell off.

On Tuesday, a key gauge of market jitters, the Chicago Board Options Exchange Volatility Index <.VIX>, rose to levels not seen since last September when investors dumped stocks in the wake of the Sept. 11 attacks.

The so-called "fear gauge" hit a high of over 52 on Tuesday, compared with 57 at the height of the panic selling in the autumn of 2001. Readings above 40.00 indicate extreme risk aversion among investors, and contrarian analysts look to these for a turning point in the market as investors finally enter the "capitulation" phase of selling the market lock, stock and barrel.

Pressuring the Dow, long-distance telephone and cable-television giant AT&T Corp. fell 7.5 percent, or 72 cents at $8.80. AT&T posted a $12.7 billion loss after charges to write down the value of some of its assets, and revenues fell as telephone sales and calling volumes dropped.

The bad news in the telecommunications industry kept coming as other firms reported dour results such as gear-maker Lucent Technologies Inc. and Baby Bell SBC Communications , a Dow component, said it expects full-year earnings to fall short of Wall Street expectations. Losses in the sector now stand at a whopping combined $20 billion.

Lucent tumbled 45 cents at $1.65 and SBC shares lost 66 cents at $23.30 after hitting a new 52-week low.

Novellus, a maker of semiconductor production equipment, fell $2.80 to $26.75. The company reported an 80 percent fall in second-quarter profit as a slump in chip sales led to weaker demand for its products.

Black & Decker climbed $3.54 to $40.37. The tool maker posted higher second-quarter earnings, as U.S. consumers clamored for tools and home and garden products. The company also raised its full-year earnings estimate.

Dynegy Inc. sank $2.17 to $1.21, or 64.2 percent, and hit an all-time low of 92 cents after the energy firm warned its cash flow this year would fall as much as 40 percent of previous forecasts, setting the stage for a possible cash crunch at the Houston-based company.

The decline hit rivals like Reliant Resources and Williams Cos. Inc. , which sank about 40 percent each.

-- (no bottom @ in. sight), July 23, 2002.


The "bubble" bloomed during Clinton's term. Hows come the 90s aren't called the "decade of greed"? Let's have a vicious, satirical movie, Ollieboy Stone.

-- (roland@hatemail.com), July 23, 2002.

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