Another Gloomy Day On Wall Street
Stocks fell sharply on Thursday as one of the busiest days for corporate earnings news brought disappointing quarterly reports, dashing hopes for what would have been the market's first back-to-back gain in two weeks.
Investors were also spooked by reports of accounting irregularities at AOL.
The Dow Jones industrial average fell 132.99 points, or 1.56 percent, to 8,409.49, the lowest close since the blue-chip gauge dropped to three-year lows in the panic selling immediately after the market reopened following the Sept. 11 attacks in the United States. It was the eighth day of declines in the last nine sessions.
The Standard & Poor's 500, dropping to a finishing low unseen since June 1997, fell 24.48 points, or 2.70 percent, to 881.56. The Nasdaq composite tumbled 40.29 points, or 2.88 percent, to 1,356.96, according to the latest data.
"Some names are reporting positive numbers, but others just aren't coming through. It just doesn't feel like this market wants to move higher and sentiment is still poor," said Anthony Iuliano, head equity trader for Glenmede Trust Co.
All three indexes closed higher Wednesday for the first time in nearly two weeks, but analysts weren't surprised that the market faltered.
"The general public hasn't made money in the stock market for two years now, so there is an acceleration of redemptions in mutual funds and stocks as investors switch to other types of investments," said Bill Meade, managing director, RBC Capital Markets.
Indeed, investor confidence remains fragile because of the market's weak performance and the accounting scandals. At the same time, prospects for a vigorous economic recovery have all but disappeared. Most analysts now say the economy — and business profits — will at best grow modestly.
As a result, many investors and institutions have been selling stocks and shifting into more conservative investments. The losses tend to intensify late in the session, as computerized trading programs. And the scarcity of buyers for stocks make stock prices more susceptible to sudden, sharp declines.
AOL Time Warner fell 66 cents to $12.45 on a Washington Post story that questioned its bookkeeping practices. The article unnerved investors, who have watched stocks slide for months now on similar concerns at other companies. AOL Time Warner denied any wrongdoing. Late in the day, the company said chief operating officer Robert Pittman was leaving his post as part of a management shake-up.
Economic news was mixed. The Labor Department said new claims for unemployment insurance fell last week to the lowest level in 17 months. But the Conference Board said its Index of Leading Economic Indicators held steady in June.
The figure matched analyst expectations but raised concerns that the recovery's momentum is fading as consumer confidence falters because of corporate accounting scandals.
Wall Street also might have been dismayed by a Federal Reserve survey showing manufacturing activity slowed considerably in the mid-Atlantic region in July and that manufacturers were less optimistic about the future.
Analysts said much of the market's attention was focused on second-quarter earnings reports, which began in earnest this week.
"A lot of investors are waiting to get more earnings data, to really ascertain what the second quarter looked like and get some idea of how the third and fourth quarters are going to be before making any big moves," said Stephen Massocca, president of Pacific Growth Equities.