NEW YORK >> Wall Street's fortunes turned negative again today as a downgrade of chip makers by Merrill Lynch and retailers' disappointing sales gave investors more reasons to doubt the strength of a business recovery. Stocks fell sharply, with the tech sector suffering the heaviest losses. Bad news for chip makers
and retailers sinks stocksBy Amy Baldwin
Associated Press"The market is in a very bad downtrend," said Gary Kaltbaum, market technician for Investors' Edge Partners in Orlando, Fla.
After a respite yesterday, the market resumed a more than week-long decline, giving back gains from the previous session's rally. Investors are selling on worries about earnings, mistrust of corporate accounting and international conflicts between India and Pakistan and Israel and Palestine.
Declining issues outnumbered advancers more than 2 to 1 on the New York Stock Exchange. Volume was moderate.
The Dow Jones industrial average closed down 172.16, or 1.8 percent, at 9,624.64. The loss easily wiped out the Dow's 108.96-point gain from yesterday, when all of the market's major indicators finished higher for the first time in nearly two weeks.
The broader market also fell sharply. The Nasdaq composite index dropped 40.38, or 2.5 percent, to 1,554.88, losing all of its 17.14 advance from yesterday.
The Standard & Poor's 500 index fell 20.75, or 2.0 percent, to 1,029.15, erasing yesterday's gain of 9.21. The Russell 2000 index fell 9.75, or 2.1 percent, to 465.29.
The price of the Treasury's 10-year note was up 9/32 point today, while its yield fell to 5.01 percent from 5.05 percent late yesterday. Two-year Treasury notes were up 1/16 point and yielded 3.09 percent, down from 3.15 percent yesterday.
Analysts said the market's persistent selling is no surprise because earnings remain depressed, jeopardizing the recovery investors had hoped would happen in the second half of 2002.
Fears of improper bookkeeping, involving Tyco and several other companies in the wake of Enron's collapse, and worries about tensions overseas also have given investors little reason to buy. The market was anxious about a terrorism update by President Bush, scheduled to be broadcast in the evening.
"There is just nobody buying. ... You still have the same problems in the Middle East, the terrorist scares, a downgrade of Intel and semiconductors. There just isn't any good news right now," said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.
Intel fell $1.18 to $27 today after Merrill Lynch lowered its near-term rating on the stock to "neutral" from "strong buy." Investors were also reluctant to take chances on Intel ahead of its mid-quarter business update, which came out after the market closed.
Citing a lower-than-expected demand for computer chips in Europe, Intel scaled back its second-quarter revenue forecast. The chip-making giant expects sales for the period ending June 29 to be between $6.2 billion and $6.5 billion, down from the previous estimate of $6.4 billion to $7 billion.
Analysts were expecting second-quarter sales of $6.7 billion and net earnings of 15 cents a share. Last year, the company recorded sales of $6.3 billion and profits of 12 cents for the period.
Also downgraded by Merrill, Texas Instruments fell 75 cents to $27.69, and Triquint Semiconductor sank 91 cents to $7.47.
Weak retail sales for May also drove the market lower. AnnTaylor fell $1.28 to $26.80 after reporting a 5.2 percent decline in sales from stores open at least a year. Sears stumbled $1.76 to $56.26 after reporting sales slumped 4.4 percent decline at its department stores.
Tyco plunged nearly 16 percent, down $2.70 at $14.60, on concerns that former chief executive Dennis Kozlowski abused company funds. New York prosecutors are investigating whether Kozlowski tapped company accounts to buy his $18 million New York apartment or whether he got interest-free loans from Tyco to buy artwork. The Securities and Exchange Commission has also opened an investigation, according to a report in The Wall Street Journal.
While the market has dropped significantly in recent sessions -- with the Dow on Monday falling to levels not seen since early February and the Nasdaq suffering its lowest close since Oct. 2 -- many analysts see no sign of reprieve for Wall Street.
Earnings are the biggest factor weighing on stocks, Kaltbaum said.
"To get things going, you have to beat earnings and beat them good," Kaltbaum said.
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.