Dow Slumps Below 8,000

September 19, 2002

The Dow, down 438 points in the past three sessions, has lost more than 1,100 points since its recent peak on Aug. 22.

(CBS MarketWatch) A nasty warning from Electronic Data Systems and a glaring earnings miss from Morgan Stanley showcased a still shaky profit environment, sending stocks sharply lower for another session. A round of weak economic news added to somber mood on Wall Street.

The Dow fell below the 8,000 level for the first time since July 24, the day all three of the major averages saw their lows for the year. After closing at 7,942, the blue-chip gauge is now just 6 percent above its July 23 intraday low of 7,532. The Nasdaq only 2 percent above its July nadir and the S&P 500 about 9 percent above it.

"Investors' emotions continue to drive the market. All you see is negative news," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif.

The most recent data point to a still sluggish labor market and raise concerns over the sustainability of a healthy pace in consumer spending. Jobless claims fell 9,000 to 424,000 in the latest week while the rolling average of first-time claims hit a four-month high.

Greenwich Capital Markets' Jade Zelnik said substantially higher- than-expected jobless claims for a second consecutive week indicate that "labor markets continue to weaken in the wake of this summer's financial market turbulence."

"Every time you turn around, there's another truck hitting the financial sector," said Dan McMahon, head of block trading for CIBC World Markets. "We were supposed to have turned the corner by now, and we haven't."

The Dow closed down 230.06, or 2.8 percent, at 7,942.39. The Dow last traded below 8,000 on since Aug. 5, but hadn't closed below that level since hitting a four-year low of 7,702.34 on July 23.

The Dow, down 438 points in the past three sessions, has lost more than 1,100 points since its recent peak on Aug. 22 as mixed economic reports and worries about war with Iraq have eroded investors' confidence.

"The economy is not really recovering, despite low interest rates," said David Briggs, head of equity trading for Federated Investors. "We're not creating jobs and companies are not able to generate a lot of earnings." In addition, he said, "Iraq is on everyone's mind."

The broader market also pulled back Thursday. The Nasdaq composite index fell 35.68, or 2.9 percent, to 1,216.45. The Standard & Poor's 500 index declined 26.14, or 3 percent, to 843.32.

Dismal earnings also pulled stocks lower.

Brokerage house Morgan Stanley fell $4.20 to $33.90 on third-quarter earnings that fell short of expectations.

IBM dropped $4.75 to $64.80 after Morgan Stanley cut its price targets and Merrill Lynch lowered its 2002 and 2003 earnings outlook on the Dow industrial. The moves on IBM were in large part due to a third-quarter profit warning by competitor EDS, which itself plunged $19.26, or nearly 53 percent, to $17.20.

Coca-Cola declined $1.63 to $47.67 and PepsiCo fell 90 cents to $37.15 after UBS Warburg downgraded each of the companies.

Declining issues outnumbered advancers nearly 4 to 1 on the New York Stock Exchange. Volume was moderate at 1.48 billion shares, compared with 1.49 billion on Wednesday.

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