NEW YORK >> Another spate of bad economic news, brokerage downgrades and profit declines further demoralized investors today, sending the Dow Jones industrials down 230 points and to their first close below 8,000 in nearly two months.
Dow below 8,000
By Amy Baldwin
"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., citing an earnings warnings by Electronic Data Systems, disappointing results at Morgan Stanley, a weak housing report and the possibility of war with Iraq.
"Investors on Wall Street are clamoring for good news that just isn't there."
Declining issues outnumbered advancers nearly 4 to 1 on the New York Stock Exchange. Volume was moderate. The Dow closed down 230.06, or 2.8 percent, at 7,942.39. The Dow last traded below 8,000 on Aug. 5, but hadn't closed below that level since hitting its July 23 low of 7,702.34.
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 broader market also pulled back. The Nasdaq composite index fell 35.69, or 2.9 percent, to 1,216.44. The Standard & Poor's 500 index declined 26.14, or 3 percent, to 843.32. The Russell 2000 index fell 11.21, or 3 percent, to 365.54.
It's been more than a week -- since Sept. 10 -- that all four major indexes have ended a session higher.
The price of the Treasury's 10-year note was up 19/32 point today, while its yield fell to 3.77 percent from 3.84 percent late yesterday. Two-year Treasury notes were up 5/32 point and yielded 1.90 percent, down from 2 percent yesterday.
Disappointing economic news has played a key role in dashing investors' hopes, and contributed to today's decline. The Commerce Department reported housing construction dropped 2.2 percent last month, surprising analysts who expected a 1.8 percent increase.
Dismal earnings and brokerage downgrades also pulled stocks lower.
Brokerage house Morgan Stanley fell $4.20 to $33.90 on third-quarter earnings that were 12 cents a share 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.
Sun Microsystems fell 30 cents to $2.70 after Banc of America cut its rating on the networker to "market perform" from "buy."
Other analysts attribute the market's slippage to investors' having expected a more pronounced economic recovery.
"Investors felt that we had a severe recession, but we didn't have a severe recession. And when you don't have a severe recession, you have a modest bounce back," said Ed Peters, chief investment officer at PanAgora Asset Management in Boston. "And so they are disappointed that we are not getting the bounce they expected."
Overseas, Japan's Nikkei stock average finished up 2.1 percent. But in Europe, France's CAC-40 fell 2.5 percent, Britain's FTSE 100 lost 1.3 percent, and Germany's DAX index dropped 3.8 percent.