- NEW YORK (Reuters)
- Stocks slumped on Thursday as investor sentiment crumbled under the weight
of U.S. saber-rattling on Iraq, Federal Reserve chief Alan Greenspan's
warning on the ballooning government deficit and data showing a weak economy.
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- Thrown into the fray were dour brokerage calls on the
key semiconductor equipment sector as well as on such leading firms as
McDonald's Corp. , the fast-food giant and Dow stock, or Sun Microsystems
, the network computing firm and one of the major names traded on the Nasdaq.
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- "There is nothing for investors to sink their teeth
into ... Every rally in God knows how long has failed and that is discouraging,"
said Uri Landesman, portfolio manager at Arlington Capital Management.
"We won't rally until a few companies start telling us things are
improving and orders are getting better. We're not getting that."
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- The blue-chip Dow Jones industrial average lost 201.76
points, or 2.35 percent, to 8,379.41, according to the latest available
data. The broad Standard & Poor's 500 slid 22.54 points, or 2.48 percent,
to 886.91. The technology-packed Nasdaq Composite Index fell 35.77 points,
or 2.72 percent, to 1,279.68.
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- Wall Street was rocked by a sharp increase in the nation's
current account deficit, which showed the economy sucked in imports at
a record pace in the second quarter. The government also said the number
of Americans signing up for state unemployment benefits last week rose
unexpectedly to the highest level in more than four months.
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- Stocks dropped at the start of trading in reaction to
that double dose of data, which heightened concerns over the outlook for
the economy.
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- Bush told the U.N. General Assembly that "action
will be unavoidable" against Iraq unless the United Nations takes
a hard line forcing Baghdad to disarm. In remarks before Congress, Greenspan
said the economy is holding up but warned that a return to spending discipline
was vital for economic health.
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- "If you are a potential buyer of stock and you have
two world leaders talking about issues that could stall economic growth,
you are going to be a lot more cautious," said Gary Wedbush, head
of trading at regional investment bank Wedbush Morgan.
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- Losers outnumbered winners by a ratio of about 8 to 3
on the New York Stock Exchange and more than 2 to 1 on the Nasdaq. Volume
was on the thin side with about 1.1 billion shares changing hands on the
Big Board and also on the Nasdaq.
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- McDonald's fell $1.03 to $20.31, a drop of 4.83 percent.
ranking among the largest percentage losers on the Dow. Salomon Smith Barney
cut its price target and third-quarter earnings estimate for McDonald's,
saying it's not doing enough to address customers' complaints on problems
such as employees' rudeness and slow service. McDonald's is slated to give
a mid-quarter update next week as its stock flounders at multiyear lows.
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- Sun Micro, down 15 cents or 4.4 percent at $3.22, fell
to lows last seen in late 1996 at $3.198, after investment house Salomon
Smith Barney said profits will be difficult in the short term. The shares
were the most active on the Nasdaq.
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- AG Edwards downgraded drugs giant Johnson & Johnson
to "hold" from "buy," partly on valuation. The shares
slumped 2.7 percent, or $1.51 to $53.97, helping pressure the Dow.
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- The shares of semiconductor makers and related companies
led stocks' downward march after a spate of dour news. These included a
sour note from investment house Lehman Brothers, which warned clients that
chip-equipment shares are likely to remain under pressure in coming months
as third-quarter results and fourth-quarter guidance fall below expectations.
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- Chip equipment maker Applied Materials Inc. fell 95 cents
to $12.74. The Philadelphia Stock Exchange semiconductor index sank 6 percent.
Top chipmaker Intel Corp. lost 92 cents to $15.70, and among other equipment
shares KLA-Tencor shed $1.89 to $31.55.
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- "This is all not good. The balance of brokerage
calls is negative and that's not helping," said Landesman.
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- Tyco International Ltd. ended flat at $17.80. It was
the most active on the New York Stock Exchange. The Securities and Exchange
Commission charged Tyco's former chief executive Dennis Kozlowski and two
other former executives with failing to disclose millions of dollars in
secret corporate loans.
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- ExxonMobil Corp. fell $1.01 to $33.59, pressuring the
Dow index, following a slump in other oil stocks. World oil prices fell
away from year highs as traders reacted bearishly to Bush's speech. His
diplomacy took the edge off a rally, which was fueled by growing expectations
that the United States will launch a strike against oil-rich Iraq.
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- UST Inc. sank $3.54, or 10.6 percent, to $29.84. The
company cut its earnings forecast for the second half of the year due to
sluggish sales volume growth at its largest unit, smokeless tobacco maker
U.S. Smokeless Tobacco Co.
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- Leggett & Platt Inc. , a maker of furniture for homes,
office and stores, sagged $1.93, or more than 8 percent, to $21.41. The
company forecast third-quarter results to hit the low end of Wall Street's
estimates due to a charge of up to $13 million to close five business facilities.
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- Early economic data helped set the sour tone for the
market. U.S. initial claims for unemployment benefits climbed by 19,000
to a seasonally adjusted 426,000 for the week ended Sept. 7, the highest
level since April 20 when claims hit 427,000, the Labor Department said.
Economists expected initial claims would inch down to 401,000..
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- "The economic data was softer than people had been
expecting or hoping for," said Alfred Kugel, senior strategist at
Stein Roe Investment Counsel. "And nothing Bush or Greenspan said
changed anybody's mind. There was hope they would say something to make
people feel better, so you got a continuation of the liquidation."
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