Steve Quayle News Alerts

June 06, 2002

NEW YORK — Stocks sank Thursday, pushing major averages to lows unseen since late last September, after a Merril Lynch downgrade of top chipmaker Intel Corp. battered technology shares and concerns over corporate accounting pushed nervous investors to sell.

The Dow Jones industrial average finished down 172.16 points, or 1.76 percent, at 9,624.64, according to the latest available figures. The broader Standard & Poor's 500 Index was beaten down 20.75 points, or 1.98 percent to 1,029.15, its lowest close since Sept. 27. The technology-laced Nasdaq Composite Index was down 40.38 points, or 2.53 percent, at 1,554.88.

More unpleasant news came after the closing bell, when technology bellwether Intel Corp. (INTC) cut its revenue forecast on slack demand from Europe. Shares of the computer chip maker, down 4 percent in the regular session, plummeted an additional 10 percent in after-hours trading, and Nasdaq's 100 biggest stocks fell about 3 percent.

"It's going to look nasty on the opening," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.

News that President Bush will address the nation and propose a new, Cabinet-level department of homeland security to concentrate on protecting the United States also rattled investors with reawakened concerns about geopolitical risk.

"Bush's announcement that he's going to speak to the nation has put fear into marketplace," said John O'Donoghue, co-head of listed stock trading at Credit Suisse First Boston. "There are worries about potential additional military actions."

Investors once again punished shares of troubled conglomerate Tyco International Ltd. (TYC), sending them to a new 5-year low, on reports former Chief Executive Dennis Kozlowski may have used the company's cash for personal loans.

The latest economic data gave early strength to stocks, but soon faded. The number of U.S. jobless claims fell sharply last week, below the key 400,000 mark for the first time in 2-1/2 months, the Labor Department said.

But even that good news -- which came ahead of the U.S. employment report for May expected early on Friday -- was not enough to sustain a rally in a market traders said seemed to have no bottom.

"At the moment the only thing that looks like keeping these markets up is a set of braces," said John Simon, a analyst at Chicago-based market research firm TradeSignals.com.

Tyco shares fell more than 15 percent to $14.60, shedding more than $5.4 billion in stock market value, as the conglomerate's misfortunes mounted. The company, which has lost nearly $90 billion of its market value since the beginning of the year, was the second most actively traded stock on the Big Board.

On the Nasdaq, Intel Corp. fell $1.18, or 4.19 percent, to $27 after Merrill analyst Joseph Osha cut mid-term ratings on seven semiconductor stocks -- including Intel, Linear Technology Corp. (LLTC), Semtech Corp. (SMTC), Texas Instruments Inc. (TXN). He said low inventory levels that have been fueling an upturn may be nearing the end.

Battered Nortel Networks Corp. (NT) shares closed down 19 cents at $1.41, a 19-year low. The telecommunications equipment supplier was expected after the close to raise $800 million from stock and convertible securities offerings.

Shares of wireless telephone companies plunged after AirGate PCS Inc. (APS) cut its subscriber growth forecast for the current quarter, scaring off investors already jittery about slowing growth in the industry.

AirGate shares fell a whopping 67 percent -- $5.65 a share -- to $2.75 on Nasdaq, where it was easily the top percentage loser. AirGate sells wireless service under the Sprint PCS Group (PCS) brand name.

Among other Sprint PCS affiliates, Alamosa Holdings Inc. shares fell $1.16, or 32 percent, but bounced off an all-time low of $1.95 on the New York Stock Exchange.

In the drugs sector, shares of Merck & Co. (MRK) ended down $1.75, or 3.18 percent, to $53.20 on the New York Stock Exchange after the company on Thursday said the label for its cholesterol fighter Zocor had been changed to indicate a potentially dangerous interaction with a widely used drug called Cordarone used to treat irregular heartbeats.

Perot Systems Corp. tumbled for the second straight day after a California state senator said the computer services firm had shown energy traders ways to manipulate the state's electricity market by exploiting loopholes in systems it had designed.

Shares of Perot Systems (PER) -- which was founded by billionaire former presidential candidate H. Ross Perot -- fell $1.65, or 11.3 percent, to $12.90. Late in the session, the company reaffirmed its financial forecast for its current quarter and the year.

More violence in the Middle East worried investors.

Israeli tanks shelled Palestinian leader Yasser Arafat's offices and troops blew up buildings in his presidential compound on Thursday in reprisal for a Palestinian car bombing, which killed 17 people. Arafat was not hurt, but one of his intelligence officers was killed.

"Fundamentally, there is nothing out there that makes any investor want to buy stocks. We are talking about Mideast tension, we are talking about corporate credibility ... the bad news is just overshadowing the good news," said Harry Michas, stock index futures trader at Manmarketmonitor.com.

The Dow and the S&P 500 bounced off key technical support levels of 9,600 and 1,028, respectively. Support for the Nasdaq lay at 1,480, according to research firm Schaeffer's Investment Research.

Resistance -- the point where sellers are likely to emerge -- is at 1,680 for the Nasdaq, 9,950 for the Dow and 1,067 for the S&P.

"The floor is very bearish, maybe a tad oversold," said one stock index futures trader on the Chicago Mercantile Exchange. "Every rally is met with good selling interest. "Everybody is bearish. Valuation concerns are paramount," he said.

Declining issues outnumbered advancers more than 2 to 1 on the New York Stock Exchange. Volume came to 1.59 billion shares, ahead of Wednesday's 1.29 billion shares.

The Russell 2000 index, which tracks smaller company stocks, fell 9.75, or 2.1 percent, to 465.29.

Overseas, Japan's Nikkei stock average fell 0.8 percent. In Europe, France's CAC-40 gained 0.5 percent, Germany's DAX index rose 0.7 percent, and Britain's FTSE 100 fell 0.6 percent.

Reuters and the Associated Press contributed to this report.
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