A Friday frenzy of selling erased all the gains stocks had made in two consecutive up days earlier this week.
The Dow Jones industrial average took a nose-dive as panicky investors jumped out of positions before the weekend.
Traders said no one wanted to go into the weekend with open positions, especially with the war against Iraq still an uncertain situation. The Dow fell 295.67 to 7,701.45.
Broader market averages also slid.
The technology-packed Nasdaq composite index plunged 22.45 to 1,199.16, while the S&P 500 index descended 27.58 to 827.37.
“A round of earnings warnings and downgrades has hobbled the blue chips,” said Tom Reynolds, an analyst with Schaeffer’s Investment Research.
Reynolds specifically cited Philip Morris, which cut its full-year earnings estimate; General Electric, which suffered downgrades from two Wall Street firms; and SBC Communications, which said it would ax 11,000 employees.
Big Mo dropped $4.87 to $37.86. GE subtracted $1.92 to $24.47. SBC fell $1.75 to $20.15.
“On the economic front, the University of Michigan consumer sentiment index declined to 86.1 in September from August’s 87.6. Wall Street had expected the number to come in at 86,” said Reynolds.
All in all, it was a bad day for investors, who lost $295 billion in wealth in just 6½ hours.
“The market is especially acute about earnings these days,” said Elizabeth White, editor of Positive Patterns, an investment newsletter. “Make your numbers, play it straight – you will be rewarded. Lie, shuffle – and you will be clobbered.”
The third quarter officially ends on Monday, and earnings warning season is upon us.
Yesterday, Delta Airlines, Callaway Golf and Cognos Inc. all warned their profits would probably be lower than Wall Street expectations.
Even as investors rushed for the exits in stocks, they snapped up bonds. The yield on the benchmark 10-year Treasury bond fell to 3.67 percent. Bond prices and yields move in opposite directions.
But rest of the world could keep the U.S. from making a rapid recovery.
“The rest of the world continues to wait for the U.S. to pull it out of recession,” said Wyss. “Unfortunately, the U.S. does not have enough steam in its recovery to pull that long a train.”
GOING FOR THE JUGULAR
Stock’s erased this week’s gains with a sell-off yesterday, marking the fifth consecutive week of declines. Here’s what happened:
Three Dow components were hammered. Investors panicked about bearish calls on General Electric Co., a warning by Philip Morris on full-year results and mass layoffs at SBC Communications.
Delta said it expects to lose a whopping $350 million in the third quarter.
The University of Michigan’s confidence index fell in September for the fourth consecutive month.