Steve Quayle News Alerts

July 12, 2002

NEW YORK — Stocks slumped Friday, with the Dow and the S&P 500 posting their steepest weekly drop since September, as a drop in consumer sentiment and rumors of new accounting irregularities persuaded investors to pull out of the market despite upbeat news from Dell Computer (DELL) and General Electric (GE).

The Dow Jones industrial average dropped 117.00 points, or 1.33 percent, to 8,684.53, according to the latest data, while the benchmark Standard & Poor's 500 gave up 5.97 points, or 0.64 percent, to 921.40.

Damage was limited at the tech-heavy Nasdaq composite by a positive outlook from Dell Computer Corp. . The composite slipped 0.87 of a point to 1,373.56.

The Russell 2000 index, which tracks smaller company stocks, fell 4.32, or 1.0 percent, to 412.36.

For the week, the Dow fell over 700 points, or 7.4 percent, the largest percentage drop sinck after the attacks, the S&P 500 fell 11.6 percent.

"I think people are just evening up ahead of the weekend," said James Volk, director of institutional trading at D.A. Davidson and Co. "We have had mostly technical rallies, and there was a little euphoria over technology yesterday and today. So I think there is some profit-taking."

Jitters over corporate chicancery resurfaced after Duke Energy said it received subpoenas from federal agencies requesting documents relating to its trading activities, including "round-trip trades," deals between two counterparties of the same volumes at the same price.

On Wednesday, Nasdaq ended at its lowest level since May 1997, the Dow suffered its largest one-day percentage loss since September 2001 and the S&P hit its lowest level since October 1997.

U.S. consumer sentiment tumbled in early July as a stock market drubbing that took major indexes to multiyear lows soured Americans' expectations for the future. The University of Michigan's preliminary consumer sentiment index fell to its lowest level since November 2001 in July, down to 86.5 from 92.4 in June. That bucked forecasts for a rise to 92.8. The data counter firm retail sales numbers issued earlier.

"The University of Michigan numbers came in weak and that caused the drop," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. He said the data cast doubt on the sustainability of spending by consumers, which accounts for two thirds of U.S. economic activity.

"Take technology out of the equation with what Dell said ...and you have the situation where the last leg is consumer spending," Hyman said. "If the consumer slows then the economy may be a little worse than expected and that will cause some nervousness."

Hyman also pointed to downgrades such as Home Depot , the home improvements giant whose investment rating was cut by Merrill Lynch which said sales are sluggish compared to competitor Lowe's

Home Depot (HD) , a Dow stock, fell $1.90 at $29.50, or 6 percent.

The disclosure by Duke (DUK), which brought back memories of the implosion of energy trading giant Enron Corp. sent Duke's shares down about 10 percent, or $2.75 at $25.20. The company said the subpoenas were from the Commodity Futures Trading Commission, which has served subpoenas on other energy companies for information on their trading activities, as well as the Houston office of the U.S. attorney regarding a grand jury investigation.

Shares of telecommunications giant WorldCom Group (WCOME) also accused of creative financial engineering and teetering on the edge of bankruptcy, fell more that 30 percent, or 4 cents at 12 cents.

General Electric, piling on gains, rose $1.25 at $28.60, or 4.5 percent, after it said second-quarter earnings rose 14 percent. Dell Computer jumped $1.61 to $25.51 in extended-hours trading Thursday after raising its fiscal second quarter outlook.

Dell, the No. 2 personal computer maker, upped its guidance for earnings and revenue, saying that it has continued to gain market share from competitors.

Other technology shares rose such as chip leader Intel Corp. (INTC), one of the main suppliers to Dell and other PC makers, rose 35 cents at $18.60, or about 2 percent. Software giant Microsoft Corp. (MSFT) rose 25 cents to $53.16. Both helped support the Dow index.

Leading tech gains also were computer networking stocks such after Internet gear maker Juniper Networks (JNPR) rose 75 cents to $7.97, or 10.6 percent, after it reported a net profit in its second quarter compared with a loss a year earlier.

Rival Cisco Systems (CSCO), moved up 66 cents at $14.71 and among second-tier firms Riverstone Networks added 12 cents at $2.62, or 4.8 percent.

Declining issues outnumbered advancers nearly 3 to 2 on the New York Stock Exchange. Volume came to 1.28 billion shares, below 1.64 billion at the same point Thursday.

On the Nasdaq, advancers led decliners more than 8 to 7.

Overseas, Japan's Nikkei stock average finished Friday up 1.1 percent. In Europe, France's CAC-40 inched up 0.04 percent, Britain's FTSE 100 slipped 0.1 percent, and Germany's DAX index rose 0.3 percent.
http://www.foxnews.com/story/0,2933,57532,00.html