Stocks extended their decline Thursday with
investors still smarting from comments by Federal Reserve Chairman
Alan Greenspan that the economy has further to fall.
Thursday's strong selloff came despite a report indicating that
manufacturing activity showed some signs of bottoming in February.
In late afternoon trading on Wall Street, the Dow Jones
industrial average fell sharply, down 105.32 at 10,389.96.
Broader market indicators were also lower. The Nasdaq composite
index was down 37.12 at 2,114.71, a level not seen since December
1998. The Standard & Poor's 500 index was down 12.74 at 1,227.20.
Analysts said the market was still disappointed by Greenspan's
congressional testimony Wednesday, when he largely dismissed the
idea that the Fed might lower interest rates before its March 20
scheduled meeting. Wall Street wants Greenspan to take quick action
to boost the flagging economy.
However, Greenspan reasoned that the economy was less sluggish
in January and February than it was at the end of 2000. Greenspan's
comments gained some support Thursday via a report from the
National Association of Purchasing Management, which said the
manufacturing sector slowed its pace of decline in February. The
NAPM said its index of business activity improved to 41.9 last
month from 41.2 in January.
"It is just a carryover from yesterday's kindergarten-type
disappointment that the Fed didn't cut rates," said Robert
Stovall, market strategist for Prudential Securities, of Thursday's
But Stovall added that the market has good reason to pout given
that each day brings a new set of companies warning that future
profits will be weak.
"We have further disappointing downscaling of future prospects
of big companies," Stovall said.
Among the big high-tech losers were semiconductors, which
dropped when Broadcom announced future earnings will be
disappointing and was downgraded by stock analysts.
Broadcom plunged $5.44 to $43.81, and Applied Materials lost
$1.81 to trade at $40.44.
Bleak profit outlooks hurt other shares, including Gateway, down
$1.84 at $15.36. The computer maker warned that first-quarter
earnings will be disappointing, and said it will restate downward
its 2000 results.
Network equipment maker 3Com dove more than 20 percent, down
$1.88 at $7.25, after warning slumping demand for its products will
cause third-quarter profits and revenue to miss expectations.
Earlier this week, it announced 1,200 layoffs.
"The question in people's minds is, `How long will this
recession in demand for technology products and services
continue?"' Stovall said.
Falling tech shares also hurt the Dow, with Microsoft tumbling
$1.69 to $57.31.
Meanwhile, non-tech, blue chip losses were widespread. Wal-Mart
was down $1.48 at $48.61, and Citigroup fell $1.64 to $47.54.
Drug stocks were mixed. Johnson & Johnson advanced $1.38 to
$98.71, but Pfizer fell $1 to $44.
Before the market opened, the government reported Americans'
incomes rose sharply in January and spending shot up even more
quickly as deep discounts inspired consumers to shop more.
The Commerce Department said incomes grew by 0.6 percent, while
spending got a 0.7 percent boost. The figures were in line with
what analysts were expecting.
Declining issues outnumbered advancers 3 to 2 on the New York
Stock Exchange. Volume was 957.79 million shares, ahead of the
876.10 million at the same point Wednesday.
The Russell 2000 index was down 7.18 at 467.19.