- NEW YORK (Reuters) - The
broad stock market fell to its lowest close in more than five years on
Wednesday after bleak comments and forecasts from Wall Street analysts
on household names as General Electric Co. GE.N and Ford Motor Co. F.N
fanned fears about corporate profits.
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- "We are seeing some of the gap between reality and
expectations closing," said Richard Babson, chairman of Babson-United,
which manages money for wealthy individuals. "There were these hopes
for a fantastic rebound ... but it turns out, it's not that fantastic.
People are talking about 2003."
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- Nervousness about disappointing earnings has prompted
investors to sell stocks, extending the market's slump and bringing about
the deepest bear market since 1937-38, according to data from Banc One
Investments Advisors. The Standard & Poor's 500 index .SPX has lost
almost 50 percent from its record close in March 2000.
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- "Overall, the trend is down because of the doubts
about the earnings prospects for many companies," said Kevin Logan,
senior market economist for Dresdner Kleinwort Wasserstein. "Are they
going to be able to grow earnings at a level to appease investors? The
answer is 'no."'
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- Financial stocks took a body blow after Moody's Investors
Service cut J.P. Morgan Chase & Co.'s JPM.N long-term debt ratings.
This affected about $42 billion of debt and reflected concern over the
banking giant's business outlook.
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- The blue-chip Dow Jones industrial average .DJI sank
215.22 points, or 2.87 percent, to 7,286.27, according to the latest available
data. The Dow closed at lows not seen since October 1997. The Dow is down
more than 37 percent from its January 2000 high.
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- The broad Standard & Poor's 500 Index .SPX slid 21.79
points, or 2.73 percent, to 776.76, closing at its lowest level since the
spring of 1997. The Nasdaq Composite .IXIC slipped 15.10 points, or 1.34
percent, to 1,114.11, carving out new 6-year closing lows.
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- Market breadth was strongly negative, with about seven
stocks falling for every one that rose on the New York Stock Exchange and
five stocks declining for every two that rose on the Nasdaq. About 1.75
billion shares traded on Nasdaq and 1.83 billion changed hands on the Big
Board.
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- Shares of major tech companies such as recently battered
Cisco Systems Inc. CSCO.O rallied and helped keep a floor under the tech-laden
index. Cisco shares, which had fallen for the previous five consecutive
trading session, bounced higher on Wednesday, gaining 63 cents, or 7.3
percent, to $9.23 as bargain hunters came out in force, said Merrill Lynch
analyst Sam Wilson.
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- Dow stock Hewlett-Packard Co. HPQ.N fell 38 cents, or
3.3 percent, to $11.16. The No. 1 printer and personal computer maker is
not counting on a pickup next year in the technology industry, Executive
Vice President Michael Winkler said in an interview with Reuters.
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- The Dow average reflected more damage after Moody's Investors
Service cut J.P. Morgan's long-term debt ratings. J.P. Morgan, another
Dow stock, lost about 7 percent, or $1.15, to $15.45. Earlier in the day,
J.P. Morgan hit a new multiyear low of $15.30. The Moody's downgrade could
make it more costly for J.P. Morgan, the No. 2 U.S. banking company, to
borrow as it tries to cut costs. Moody's, however, pointed out that Morgan's
liquidity is "strong" and capital ratios are "good."
But the loan losses mount. The bank is preparing to cut thousands of jobs,
people familiar with the companies said, as underwriting and trading revenue
decline.
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- The Philadelphia banking index .BKX lost 4.3 percent.
Among other Dow financials, American Express Co. AXP.N lost $1.07 to $27.33
and Citigroup C.N shed 95 cents at $26.89.
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- General Electric, the most active share on the New York
Stock Exchange, fell about 6 percent, or $1.35, to $22, hurting blue chips
and financial stocks, too, after Morgan Stanley cut the stock's price target
and said the conglomerate "could be walking into the most difficult
operating environment that GE has experienced in at least a couple of decades."
Morgan Stanley also cited concerns over losses in GE Capital's portfolio.
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- "Seems to me that the story is the financial services
areas, and GE and Ford Motor. Investors seem a bit concerned about credit
in the United States," said Val Jensen, president of The Jensen Portfolio.
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- Automakers tumbled again after Morgan Stanley cut its
earnings outlook on Ford, General Motors GM.N and DaimlerChrysler DCX.N
, citing lower production forecasts, a day after Credit Suisse First Boston
downgraded the sector.
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- Ford, among the most active stocks on the NYSE, dropped
60 cents to $7.15. GM fell $2.59 to $31.01. The U.S.-traded shares of Germany's
DaimlerChrysler fell $2.07 to $30.17.
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- Another bearish call came from Goldman Sachs investment
strategist Abby Joseph Cohen, who cut her 12- to 18-month target on the
Dow to 10,800 from 11,300 and slashed her target on the S&P 500 to
1,150 to 1,300. The strategist, known for her bullishness, said stocks
are undervalued at current levels, but the equity risk premium is near
a 30-year high.
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- Some said worries about the long-term costs of the West
Coast lockout also hurt stocks. President Bush stepped in Tuesday to stop
a management lockout that has cost the U.S. economy billions since it began
Sept. 29. Still, dock operators cautioned it may take weeks to clear backed-up
cargo, just at the start of the crucial U.S. holiday shopping season.
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- In other market-moving news, drugmaker Merck and Co Inc.
MRK.N late in Wednesday's session reaffirmed 2002 earnings would be flat
compared with 2001, as slowing sales of arthritis drug Vioxx and generic
competition hurt revenue this year.
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- Shares of Merck, down 3.5 percent before the announcement,
rose after the outlook was released, but fell again to close at $45.63,
down 37 cents or 0.8 percent.
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- The Boston Celtics BOS.N were hot and the National Basketball
Association season hasn't even started. Shares of the storied basketball
franchise shot up 147 percent, closing up $16.65 at $28. Details of a buyout
offer for the team were unveiled last week.
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