Wall Street’s misery deepened yesterday over fears our economy’s slump will persist longer than a year.
Shares tumbled in all major markets as investors braced for the prospect of more gloomy news today in the government’s latest figures on consumer spending.
Weak consumer spending would devastate hopes of a rebound in consumer confidence and stall a quick recovery, analysts say.
“Retrenching by consumers is bad news and very troubling, and that’s what worries investors the most,” said Hugh A. Johnson, chief investment officer for First Albany.
“Federal Reserve officials are telling investors there’ll be a second-half recovery, but they don’t believe them anymore,” he said.
Trampled by negative earnings outlooks, tech stocks continued their steady slide to push the Nasdaq to its lowest level in seven weeks. The index lost 4.4 percent of its value, dropping 107.03 points to 2,318.35.
“The earnings picture for technology is miserable right now – and it’s getting worse, not better,” said Guy Truicko, portfolio manager at Unity Management.
Investors fled techs as the shares searched for a bottom. Intel lost more than 7 percent, dropping $2.94 to $31.44; PMC-Sierra fell $7.88 to $44.63; Applied Micro Circuits dropped $5.33 to $38.48; and Broadcom lost $9.75 to a new low of $64.38.
Blue-chips also took a big hit over weak earnings, with the Dow Jones industrial average down 68.94, or 0.69 percent, to 10,730.88. The Standard & Poor’s 500 skidded 22.58, or 1.70 percent, to 1,278.95.
Cisco Systems led the Nasdaq rout by losing $2.19 to $26.06 – its lowest level in nearly two years.
Cisco’s chief executive said in a Swedish interview over the weekend that much of the U.S. economy was in a recession that threatened to spread across the globe.
An analyst’s earnings pan for fiber-optic parts maker JDS Uniphase sent it reeling to lose more than 4 percent, down $1.50 to $34.31. Earlier, it hit $31.63, its lowest level in two years.
Among the few blue-chip winners were two giant retailers. Wal-Mart rose $1.04 to $53.40 after posting a 4.5 percent increase in earnings. Home Depot rose $1.09 to $44.09 after saying first-quarter earnings should be in line with Wall Street’s forecasts.
Big losers included IBM, down $3.50 to $111.50; Hewlett-Packard, off $2.64 to $30.49; Citigroup, $2.80 lower to $51.20; and American Express, off $1.24 To $45.98.
Prospects of lower trading reevnues slammed brokerages stocks, with Lehman Brothers skidding $7.14 to $72. Bank of New York lost $3.34 to $50.66.
After a slow first half, economists expect the economy to pick up with growth rates of 3.3 percent and 3.7 percent in the final two quarters of the year, according to a survey released yesterday by the Philadelphia Fed Bank.
But many investors and analysts doubt that kind of growth.
“There’s a lot of trepidation – we can’t seem to get our arms around where the economy is going,” said Bryan Piskorowski, vice president and market analyst at Prudential Securities.
Earlier this month, the University of Michigan’s survey of consumer sentiment dropped to 87.8 from 94.7 in January and 98.4 in December. February’s reading was the lowest since June 1996.
“Consumer spending accounts for two-thirds of our economy, and if consumers retrench, it’s not good at all,” said Johnson of First Albany “A second half pickup? Getting there is harder and harder, and it’s not looking quite so soft any more.”
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Imperfect 10
After another disastrous day, the Nasdaq has lost almost 10 percent of its value in two trading sessions.
HERE’S WHAT HAPPENED:
* Analysts slashed profit estimates on investor favorites JDS Uniphase and Applied Micro Circuits, sparking a broad sell-off in the tech sector.
* Good showings from Home Depot and Wal-Mart weren’t enough to pull the Dow up, and it lost 68.94 points to 10,730.88.
* The Nasadq lost 107.03 points – or 4.4 percent – and is now down over 6 percent for the year.