Closing Market Report

Star-Bulletin news services

Tuesday, May 28, 2002

Day off fails
to lift market

Economic data gives Wall Street
another reason to sell off

By Lisa Singhania
Associated Press

NEW YORK >> Weaker-than-expected consumer confidence and spending figures sent stocks tumbling today as investors grew concerned that the economic recovery was slowing. The Dow Jones industrials posted their second straight triple-digit decline.

Light trading, the result of many investors extending their Memorial Day vacations, also made the market susceptible to extreme losses or gains. Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume came to 952.5 million shares, compared with 887.3 million Friday. U.S. markets were closed yesterday in observance of Memorial Day.

The Dow closed down 122.68, or 1.2 percent, at 9,981.58. It was the Dow's first close below 10,000 since May 10, and followed a 111-point drop Friday.

Broader stock indicators also retreated. The Nasdaq composite index slid 9.32, or 0.6 percent, to 1,652.17. The Standard & Poor's 500 index fell 9.27, or 0.9 percent, to 1,074.55. The Russell 2000 index dropped 1.23 to 492.41.

The price of the Treasury's 10-year note was up 1/16 point today, while its yield fell to 5.13 percent from 5.14 percent late Friday. Two-year Treasury notes fell 1/32 to 100 1/4, while their yield rose to 3.24 percent, from 3.23 percent late Friday.

Wall Street got off to a negative start early in the session on consumer data that showed improvement, but not as much strength as investors had anticipated.

"It wasn't bad economic data, it just didn't surprise us on the upside," said John Forelli, portfolio manager for Independence Investment LLC. "The market needs good news to make it go forward, and there's just a dearth of good news right now.

The Conference Board reported today that consumer confidence rose in May to 109.8 from a revised 108.5 in April. Analysts had expected a reading of 110.0 from the survey conducted by the business group.

The figures were similar to a Commerce Department report for April, which showed incomes rising by 0.3 percent and consumer spending up 0.5 percent. The income figure was in line with analyst forecasts, but consumer spending was a little lower than expected.

Critical research reports about bellwethers and Dow components Home Depot and Intel intensified the decline.

Home Depot dropped $1.88 to $41.54 after UBS Warburg downgraded the stock to "hold" from "buy" citing concerns about its business strategy.

Among tech stocks, Intel lost 31 cents, falling to $28.35 after Merrill Lynch reduced its earnings estimates for the chipmaker, citing soft revenues.

Personal computer makers, which depend heavily on consumer spending, were especially vulnerable. Gateway fell 11 cents to $5.57, while Dell tumbled 37 cents to $26.85.

But Dynegy soared 39 cents to $9.69 after the energy marketer's top executive resigned because of problems including a decline of as much as 88 percent in its stock value from the year's high.

And Halliburton rose 25 cents to $19.35 following news the oil services company has settled 30 asbestos exposure lawsuits. Concern about the costs of asbestos-related litigation has weighed the stock down.

Overall, though, the market's mood was pessimistic -- in keeping with the negative tone that has characterized trading for most of the month. Although stocks have managed some occasional rallies, the gains have been fleeting as investors unload issues on the first sign of disappointment or difficulties ahead. Mediocre earnings and lackluster outlooks are to blame for most of the selling, but the prospect of more terror attacks has added to the downward pressure.

Overseas, Japan's Nikkei stock average fell 0.3 percent. In Europe, Germany's DAX index lost 0.9 percent, Britain's FTSE 100 dropped 1.2 percent, and France's CAC-40 fell 0.5 percent.

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