Steve Quayle News Alerts

October 4, 2002

NEW YORK — Stocks collapsed Friday, handing Wall Street its sixth-straight losing week, as a hail of profit warnings from companies and a jury award of $28 billion in damages against tobacco giant Philip Morris Cos. (MO) sparked another wave of selling.

The blue-chip Dow tumbled 188.79 points, or 2.45 percent, to 7,528.79, according to the latest figures, slamming to its lowest close since November 1997. The broader Standard & Poor's 500 Index fell 18.37 points, or 2.24 percent, to 800.58.

The technology-packed Nasdaq Composite Index lost 25.66 points, or 2.20 percent, to 1,139.90, sinking to its lowest level since September 1996.

"People are scared to buy stocks," said Anthony Iuliano, head equity trader for Glenmede Trust Co., as the Dow Jones industrial average hit its lowest close in nearly five years.

All three gauges posted their sixth straight losing week. For the Nasdaq and S&P 500, it was the longest string of losing weeks since the first half of 2001. For the week, the Nasdaq fell almost 5 percent, the Dow lost more than 2 percent and the S&P 500 surrendered more than 3 percent.

EMC tanked 21 percent after saying it no longer sees returning to profits for the second half of the year in a "brutal" environment for information-technology spending. Boeing (BA) sank 5 percent after warning of disappointing earnings amid a slump in the air travel industry.

A mixed reading on the job market in September, continuing fears of a war on Iraq and a whopping judgment in a tobacco lawsuit added to market jitters.

Philip Morris, also a Dow 30 stock, sank 7 percent and sparked a fresh round of selling in the afternoon after a jury ordered the world's largest cigarette maker to pay $28 billion in damages to a woman with lung cancer.

"It's tough to find stock that you really want to buy in this type of environment," said Dan McMahon, head of listed trading at CIBC World Markets Inc.

"The mood is pretty bad, and I think the feeling is that we have even more work to do," said David Memmott, head of listed block trading at Morgan Stanley.

The market had opened higher after the government said the U.S. jobless rate fell to 5.6 percent in September from 5.7 percent in August. But there were troublesome spots in the report, traders said. Payrolls fell in September for the first time in five months, showing an uneven pace to the U.S. economic recovery.

Early gains quickly evaporated and the market headed lower as Wall Street grappled with a host of worries. Stocks added to losses after officials said President Bush on Monday will give his first prime-time televised speech about the threat posed by Iraq and will stress that time is running out for Baghdad to disarm.

Philip Morris (MO) skidded $2.91 to $36.59 and ranked as the biggest percentage loser on the Dow. A Los Angeles jury ordered Philip Morris to pay a record $28 billion in punitive damages to a woman with lung cancer who blamed the company for failing to warn her of the risks of smoking. Philip Morris said it would appeal the judgment, the largest award ever in an individual tobacco liability lawsuit.

Boeing (BA) lost $2.30 to $32.01, adding more pressure to the Dow. The world's largest commercial jet maker said the shrinking value of jets it finances in the wake of the Sept. 11 attacks will cut quarterly net earnings by $158 million.

Alcoa Inc. (AA) , another Dow stock, fell 99 cents, or almost 5 percent, to $19.11. The world's top aluminum producer reported a 43 percent drop in quarterly profit, stung by lower prices resulting from a worldwide glut of aluminum and slow economic growth.

EMC (EMC) tumbled $1.18 to $3.83 and ranked as the most active on the New York Stock Exchange. The data storage company reported a preliminary quarterly loss and revenues that were worse than expected.

The EMC warning pressured the storage sector. Emulex Corp. (ELX) dropped $1.68, or more than 16 percent, to $8.35. Brocade Communications Systems Inc. (BRCD) gave up 70 cents, or about 10 percent, to $5.82. Network Appliance Inc. (NTAP) lost 38 cents, or 5 percent, to $6.27.

Schering-Plough Corp. (SGP) fell 34 cents to $17.30, adding to days of steep declines. The drug company warned that its earnings in 2003 and 2004 will be far below forecasts as the firm braces for loss of patent protection on top allergy drug Claritin. Schering-Plough was second-most active on the NYSE.

The Labor Department said before the open that payrolls outside the farm sector fell by 43,000, in contrast to the 5,000 gain private economists had predicted.

Even more surprising to analysts, however, was a decline in the unemployment rate to 5.6 percent in September from 5.7 percent in August. Experts had forecast a rise in the rate to 5.9 percent.

"This is the proverbial mixed bag," said Richard Yamarone, economist at Argus Research in New York of the employment data.

Traders said the lockout of longshoremen at West Coast ports helped pressure the market. Negotiators pressed ahead with a second day of talks aimed at ending the six-day-old lockout, which has already sent economic problems cascading through the U.S. economy and overseas.

Losers trounced winners by a ratio of 3 to 1 on the New York Stock Exchange and roughly 12 to 5 on the Nasdaq. More than 1.81 billion shares changed hands on the Big Board and more than 1.58 billion on Nasdaq.

The Russell 2000 index fell 8.87, or 2.5 percent, to 347.98.

Overseas, Japan's Nikkei stock average rose 1.0 percent. In Europe, Germany's DAX index lost 3.5 percent, Britain's FTSE 100 was down 1.7 percent, and France's CAC-40 fell 3.3 percent.

http://www.foxnews.com/story/0,2933,64822,00.html