Scarcity of buyers sends market
back to post-attack lows

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By Amy Baldwin
Associated Press

NEW YORK >> When the market plunged sharply following the Sept. 11 attacks, investors were concerned but understanding. However, nine months later, with stocks seemingly on a retreat back to those levels, Wall Street is considerably more worried.

"There is just no motivation for people to pull their wallets out of their pocket, and say, 'Let's spend some money on stocks,"' said Richard A. Dickson, a technical analyst for Hilliard Lyons in Louisville, Ky. "There are a lot of things to worry about."

Wall Street is painfully aware of its lack of buyers. The Nasdaq composite index is just 112 points, or almost 8 percent, away from its Sept. 21 low of 1,423.19. The Standard & Poor's 500 index stands 61 points, or 6.4 percent, above its low of 965.80. The Dow Jones industrials is holding up the best, up 1,353, or 16.4 percent, from its low of 8,235.81.

Despite the market's precipitous drop last September -- the Dow fell 1,369 points in a week -- stocks came back rather quickly. The Dow recouped its losses in seven weeks. The Nasdaq, which fell 272 the week after the attacks, and Standard & Poor's, which dropped 126, retraced their losses after three weeks.

What's changed since then is that the market's problems are more chronic -- dismal earnings, probes in corporate bookkeeping after Enron's collapse and shattered investor confidence. Tensions overseas, between India and Pakistan and in the Middle East, have also given investors little reason to take chances on stocks.

"What the market is experiencing is a barrage of negative news. ... We have a lot of problems out there, and what we need is a catalyst to change the mood of the depressed investor," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc.

But overcoming a string of negative factors is proving to be much harder for the market to overcome than an unforeseen, catastrophic event.

The market had been looking in vain for an economic turnaround or profits rebound to lift it higher. But with an economic recovery that has been slower than investors anticipated, and with earnings still yet to improve, stocks continue to languish.

"The thinking is that, yeah, the economy is recovering, but you have all these other things to worry about," Dickson said.

Analysts say Wall Street's biggest problem is the fact that earnings have not rebounded, and might not do so by year's end as investors had hoped. Corporate outlooks have improved little, and some remain bleak. Intel said Thursday second-quarter revenues would miss targets, raising fears among investors that more companies will warn of lower profits and sales throughout June.

"People are concerned about paying for stock without knowing what earnings will be. At this point, we are getting into the (earnings) preannouncements for the second quarter, and that has people on edge too," said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.

"The market has been struggling, because the market is really earnings driven. People pay for stocks ultimately based on the earnings power of companies."

The market's major indexes ended the week sharply lower.

The Dow fell 335.58, or 3.4 percent, for the week, after declining 34.97 to 9,589.67 yesterday.

The Nasdaq had a weekly loss of 80.25, or 5.0 percent, after falling 19.40 to 1,535.48 yesterday.

For the week, the S&P 500 index fell 39.61, or 3.7 percent. Yesterday, the S&P slipped 1.62 to 1,027.53.

The Russell 2000 index had a weekly loss of 16.96, or 3.5 percent. Yesterday, the Russell rose 5.22 to 470.51.

The Wilshire Associates Equity Index, which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues, ended the week at $9.752 trillion, off $353.80 billion from the previous week. A year ago, the index was $11.736 trillion.