Dow finishes below 10,000 for first time since March


Associated Press

NEW YORK – Stocks dropped sharply in volatile trading today, slicing more than 400 points off the Dow Jones industrials before bargain hunters moved in and helped the market recover most of its losses.

Investor despair over a generally bleak earnings outlook brought the Dow to its first finish below 10,000 since March 14, although the blue chips managed to regain more than 300 points of their early loss. The tech-focused Nasdaq composite index also ended the day with a loss, but it also rebounded smartly from its lows for the day.

“I think we are near the bottom, but this is a bottom that’s going to need some credibility,” said Brian Belski, a fundamental market strategist at U.S. Bancorp Piper Jaffray, who said bargain hunting, not any resolution of market problems, was responsible for the upturn. “There are still doubts about earnings growth rates and there are going to be doubts about the rally and reversal today.”

Bill Barker, an investment strategy consultant with Dain Rauscher, said, “we’re working our way through earnings, but the fundamentals haven’t changed.”

“Oil is still high, the euro is down and the Middle East is still in a potentially explosive situation,” he said.

The Dow closed down 114.69 at 9,975.02, according to preliminary calculations, largely because of a huge drop in IBM. An earlier decline of more than 433 points sent the blue chip index to its lowest intraday trading level since March 24, 1999.

The Nasdaq fell 42.56 to 3,171.40, bobbing in and out of positive territory after rebounding from a nearly 188-point slide in the first hour. And the Standard &Poor’s 500 index was down 7.86 at 1,342.11, having recovered from an early drop of 44 points.

Market activity wasn’t expected to end with the close of regular trading. With the third-quarter earnings season at its peak, investors were waiting for results from Microsoft and Apple Computer.

At the end of regular trading, Apple Computer was off 6 cents at $20.06.

America Online also reported its earnings after regular trading ended. AOL rose $3.54 to $47.14 in the regular session.

Investors in search of cheap tech stocks appeared to be responsible for the market’s recovery. Sun Microsystems rose $4.13 to $115.50 after reporting earnings well ahead of Wall Street expectations.

Intel, which reported earnings in line with analyst estimates late Tuesday, rose $1.94, or about 5 percent, to $38.13. Investors appeared to believe that the chip maker which has fallen about 50 percent in two months, was fairly valued given its results.

“I think that we had a momentary panicky situation. For about an hour, the sellers were in control,” said Barker of Dain Rauscher. “But there’s a lot of cash out there and people continue to buy on market weakness without fear.”

The rise in Intel wasn’t enough to contain the hemorrhaging on the Dow caused by IBM. The computer maker also reported earnings in line with expectations late Tuesday, but investors worried about low revenues sold off its shares. A Labor Department report early today showing a pickup in inflation compounded the selloff.

IBM fell $17.56, nearly 16 percent to $95.54, after dropping to as low as $90.25 in morning trading. The decline accounted for more than 100 points of the Dow’s early slide.

“You’ve got evidence now that the disappointing earnings picture is a generalized event and not company-specific,” said Robert J. Barbera, chief economist at Hoenig &Co. “You’ve got superimposed on that some inflation news that says it’s hard to argue the Fed will imminently come to the rescue.”

J.P. Morgan’s results beat Wall Street expectations, but investors punished it anyway because of its planned merger with Chase Manhattan, which reported disappointing earnings. Morgan plunged in the morning to $118, but had recovered by late afternoon and was off $4.50 at $133.13. Chase slipped $1.13 to $36.18.

The market opened on news that consumer prices jumped 0.5 percent in September, the biggest advance since June, as energy prices rebounded sharply. The increase renewed fears that the Federal Reserve would keep interest rates unchanged, rather than lowering them, at its next meeting in November.

The euro plummeted to a record low against the U.S. dollar in midday trading today in New York. But European markets, which were down sharply in afternoon trading, recovered somewhat along with stocks in New York. Germany’s DAX index was off 0.75 percent, Britain’s FT-SE 100 fell 0.89 percent, and France’s CAC-40 dropped 2.14 percent. Japan’s Nikkei stock average, which closed before U.S. markets opened, ended the day down 3.05 percent.

Declining issues outnumbered advances by about 3 to 1 on the New York Stock Exchange. Volume was 1.17 billion shares, well ahead of the 906.67 million shares Tuesday.

The Russell 2000 index fell 4.67 to 466.21.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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