- NEW YORK (Reuters) - Stocks
slumped on Thursday after a slew of economic reports, including one revealing
sluggishness in the key U.S. service sector, fanned fears a weak economy
will hinder growth in corporate profits.
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- "The whole thing points to a soft economy, which
leads people to be worried about the earnings pre-announcement season that's
coming up," said Henry Herrmann, chief investment officer at Waddell
& Reed. "We're just not getting enough of an 'oomph' to make people
feel good about positive earnings surprises."
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- Compounding concerns about the fragility of the global
economy were worries about a possible U.S. attack on Iraq as the rhetoric
from the United States and the Arab world heated up.
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- Soggy August retail sales also dampened the mood on Wall
Street, heightening worries that U.S. consumers will snap their wallets
shut and crimp corporate profits.
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- "The fear is that if the economy is going to slow,
it's going to drag on the consumer, and the consumer has been a bastion
of strength," said Rick Jandrain, chief investment officer at Banc
One Investment Advisors.
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- Technology stocks were among the hardest hit. The tech-laced
Nasdaq Composite Index .IXIC closed at its lowest level in a month, down
41.28 points, or 3.19 percent, at 1,251.03, according to the latest available
figures.
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- The blue-chip Dow Jones industrials .DJI fell 141.42
points, or 1.68 percent, to 8,283.70, and the broad Standard & Poor's
500 .SPX dropped 14.25 points, or 1.60 percent, to 879.15.
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- Investors were also bracing for a midquarter update from
Intel Corp. INTC.O . The world's largest chip maker fell nearly 6 percent,
down $1 to $15.11 in the regular session, as apprehension about future
earnings grew ahead of its update due after the bell.
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- After the close Intel reported revenues would likely
come in slightly below the midrange of its previous estimates. Intel's
stock rebounded to trade at $15.70 in after-hours activity. Intel had been
slapped lower in recent sessions amid worries about its performance. A
handful of investment banks this week reduced earnings-per-share forecasts
for Intel.
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- Disappointing earnings news spurred some of the day's
selling, and investors were bracing for more bad news on corporate profits
in coming days as analysts race to ratchet down their earnings expectations.
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- Concord EFS Inc. CEFT.O was one, down $4.58, or more
than 24 percent, to $14.30, ranking as the most active stock on the Nasdaq.
The electronic payments processor said its 2002 earnings will be lower
than expected because recent acquisitions have driven up expenses and it
has faced delays "implementing" its backlog of new business.
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- Debt-burdened Qwest Communications International Inc.
Q.N lost 40 cents to $3.20 and ranked as the most active on the New York
Stock Exchange. Moody's Investors Service cut the telephone and data services
company's debt ratings, a day after Qwest said it amended its $3.4 billion
credit line in a bid to avoid bankruptcy.
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- Financial stocks took a dive. Goldman Sachs GS.N fell
$2.61 to $72.89. The U.S. House Financial Services Committee is widening
its probe into Wall Street, seeking information on possible special access
to hot initial public offerings at Goldman Sachs and Credit Suisse First
Boston as they vied for investment banking business.
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- Political tensions surrounding the Middle East cast a
pall over the market. The White House said President Bush believed there
was enough evidence to justify ousting Iraqi leader Saddam Hussein, but
Arab League chief Amr Moussa said a strike on Iraq would "open the
gates of hell" in the Middle East.
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- Jitters ahead of next week's anniversary of the Sept.
11 attacks, a deadly car bombing in Kabul and an attempt on the life of
Afghan President Hamid Karzai in Kandahar added to investors' queasiness.
U.S. Treasuries and gold stocks climbed as skittish investors sought protection
from falling stocks.
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- Thursday's flurry of economic data did little to shore
up investors' sorely tested faith in the economy. Reports on worker productivity
and business investment showed improvement, but that was clouded by weak
service sector data and stubbornly high jobless claims. Financial markets
were also bracing for key labor market data due on Friday.
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- "You have a low-grade headache about the war on
Iraq, but the real pain in your stomach is the economy," said Jon
Brorson, director of equities at Northern Trust Co.
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- Growth in the U.S. service sector, which makes up roughly
80 percent of the economy, eased for a third straight month in August to
its slowest pace since January, a report said.
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- The Institute for Supply Management said its monthly
non-manufacturing index fell in August to 50.9 from 53.1 in July, posting
a seventh straight month of growth but coming in below forecasts for a
rise to 53.6. A number above 50 indicates growth in the sector.
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- The number of Americans lining up for unemployment benefits
slipped last week, the government reported, but the fact that claims spent
a second week above the key 400,000 level raised fears the economy is struggling
to create jobs.
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- Retailers took the spotlight as investors questioned
whether consumer spending, the main engine behind U.S. growth, can stand
up in the face of a weak economy. U.S. consumers took advantage of sweet
financing deals to buy big-ticket items in August but left many of this
fall's fashions on store shelves.
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- Wal-Mart Stores Inc. WMT.N , the world's largest retailer,
was down 2.5 percent after saying sales at stores open at least a year
landed lower than expectations. Wal-Mart fell $1.40 to $50.94.
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- Discount retailer Target Corp. TGT.N also slumped, down
$1.22 at $33.10.
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- Consumer products maker Procter & Gamble Co. PG.N
emerged as a bright spot, rising $1.29 to $89.85. The Dow component raised
its earnings forecast for the fourth straight quarter.
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