Stocks fall to near a 3-year-low

Across-the-board decline sends Dow down 382, to 8,376

3rd steep plunge in 4 days

Dive occurs despite encouraging words from Greenspan

September 21, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

Stocks plunged across the board yesterday, sending benchmark indexes to the lowest levels in nearly three years despite encouraging words from Federal Reserve Chairman Alan Greenspan.

It was the third steep decline in four days of trading, which resumed Monday after the terrorist attacks on the World Trade Center and the Pentagon Sept. 11.

The Dow Jones industrial average of 30 blue chip companies tumbled 382.92 points, or 4.37 percent, to 8,376.21.

The Nasdaq composite index, which is heavily weighted with technology companies, lost 56.87 points, or 3.72 percent, to close at 1,470.93. The Standard & Poor's 500 stock index, a broad measure of the market, dropped 31.56 points, or 3.11 percent, to 984.54.

Trading was heavy, with more than 2 billion shares changing hands on the New York Stock Exchange.

"Not a pretty picture. Not a pretty picture at all," said Douglas G. Ober, chairman and chief executive of Adams Express Co., a Baltimore investment company. "I think we are operating in an vacuum of information. The tradition of the market when it is operating without information, it just falls."

The Dow, which dropped a record 684.81 points Monday, has shed 1,229.3 points, or 12.8 percent, this week; the Nasdaq has lost 224.45 points, or 13.2 percent; and the S&P 500 has fallen 108 points, or 9.9 percent. The last time the indexes closed lower was in October 1998.

Not even a positive message from Greenspan could buoy investors' grim mood.

Greenspan, speaking to members of the Senate Banking Committee on Capitol Hill, acknowledged that the attack was roiling the economy.

But the long-term outlook has not been "significantly diminished. ... Over the past couple of decades, the American economy has become increasingly resilient to shocks," Greenspan said.

The Fed chairman also said he did not expect the U.S. economy to go unscathed.

"The shock of September 11, by markedly raising the degree of uncertainty about the future, has the potential to result, for a time, in a pronounced disengagement from future commitments," he said.

Yesterday's drop was sobering for many veteran market analysts. It pushed the Dow firmly into a bear market along with the S&P 500. Both have lost more than 20 percent - the definition of a bear market - since the year began. The Nasdaq has been in a bear market for even longer.

Experts said the market is being buffeted on all fronts.

Investors are worried about the impact of a drawn-out campaign against terrorism and a floundering economy being hit daily with announcements of new layoffs and warnings about corporate earnings, experts said.

"This is either the perfect storm or the cruel sea," said Alan Ackerman, market strategist at Fahnestock & Co., a New York-based brokerage house. "A lot of professionals who have been in the business 30 years and more are stumped what to do next. Finding a strategy is like trying to hold on to a wet football on a muddy field."

David M. DiPietro, head of North American equities at Deutsche Banc Alex. Brown, called the week "unprecedented ... on every imaginable front."

DiPietro said several technical factors, including today's triple witching hour, might have contributed to the market's decline but that investors are largely reacting to the prospect of further deterioration in corporate profits and the economy.

"It just seems to be kind of snowballing a bit in this week," DiPietro said. "Today was not a day when people were going to leap in with both feet. Everyone is looking for positive news, and most of the news has been neutral or worse."

More economists have become convinced that the economy is in a recession.

A recession is "a given," said Will Braman, chief investment officer at John Hancock Funds Inc. in Boston. He expects business to slow to a crawl in the coming months, saying there will be a "hiatus of business activity and consumer spending."

A slowing economy surely isn't good news for the stock market, said Bryan Piskorowski, a market commentator at Prudential Financial in New York.

"The third quarter is going to be tough, and the fourth quarter could be tough. Death by a thousand knives," Piskorowski said. "It is tough to look forward here."

Many say it is clear that large institutions are leading the selling.

Small investors, however, seem to be holding firm.

Steven E. Norwitz, a spokesman at T. Rowe Price Group, a Baltimore-based mutual fund company, said the company has experienced outflows in its equity funds since the attack.

"It represents a very small portion of total assets," Norwitz said. "We will see how it goes day by day."

Many experts think the stock market is close to the bottom, but some say it is still too hard to tell.

"Nobody knows," Ackerman said. "There are so many complex cross-currents. Projecting a bottom is difficult to divine. We continue to have a parade of horribles, and buyers are simply sitting on the sidelines."

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