Market sells off
despite Bush speech

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By Lisa Singhania
Associated Press

NEW YORK >> Investors sent stocks sharply lower for a second consecutive session today as worries about second-quarter earnings reports overshadowed President Bush's proposal to increase the penalties for corporate fraud.

The losses, which followed a selloff yesterday, erased much of Friday's big rally. Analysts said after months of accounting scandals and disappointing financial results, it will take more than a few words to convince investors that it is safe to come back to the market.

"We're just coming into earnings season now," said Will Braman, chief investment officer, John Hancock Funds. "It's time for 'show us the money,' and investors' expectations are not very high. There is a lot of skepticism. The numbers we get are going to be pawed over and looked at very critically."

Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume came to 1.34 billion shares, compared with 1.16 billion yesterday. Decliners led advancers 5 to 4 on the Nasdaq Stock Market.

The Dow Jones industrial average closed down 178.81, or 1.9 percent, to 9,096.09. It was the average's second triple-digit decline this week, for a total loss of 283.41 that wiped out much of Friday's 324-point rebound. Stocks had pulled back yesterday as investors collected profits.

Broader stock gauges also retreated today. The Standard & Poor's 500 index fell 24.15, or 2.0 percent, to 952.83, and the Nasdaq composite index lost 24.48, or 1.7 percent, to 1,381.13. This week alone, the Nasdaq has tumbled 4.6 percent. The Russell 2000 index fell 4.36 to 429.25.

The price of the Treasury's 10-year note was up 9/16 point today, while its yield fell to 4.72 percent from 4.80 percent late yesterday. Two-year Treasury notes gained 3/16, while their yield dropped to 2.69 percent from 2.80 percent yesterday.

Bush called for longer prison sentences for executives who defraud the public and stronger powers for the Securities and Exchange Commission. He also wants to put together a task force to pursue and prosecute corporate fraud. Bush's comments failed to convince disillusioned investors that better days were ahead, however.

"I think actions speak louder than words. If somebody goes to jail, maybe people will take corporate America a little more seriously," said Jack Francis, managing director and head of Nasdaq trading at UBS Warburg.

Analysts also said investors were reluctant to make any big commitments without more earnings information. Second-quarter reports are due out later this month.

Pharmaceutical company Wyeth plummeted $11.94, or 24.3 percent, to $37.70 on word that a government study had found the long-term use of hormone therapy by women significantly increased the risk of breast cancer, strokes and heart attacks. Wyeth makes supplements used in hormone therapy. The selling spread to other drug companies, including Merck, which had fallen yesterday on concerns about its accounting methods. Merck lost $2.06 to $45.75.

In the tech sector, semiconductor stocks pulled back after Merrill Lynch and Deutsche Bank reduced their forecasts for many companies in the group, citing weak order prospects. Applied Materials dropped $1.28 to $17.72, while Texas Instruments lost 85 cents to $23.30. Bellwether Intel slid 54 cents to $17.96.

Japan's Nikkei stock average rose 1.8 percent. In Europe, Germany's DAX index lost 1.6 percent, Britain's FTSE 100 was down 1.3 percent, and France's CAC-40 was down 1.0 percent.