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Dow strumbles on growth fears { July 24 2004 } Original Source Link: (May no longer be active)
http://www.boston.com/business/markets/articles/2004/07/24/dow_stumbles_on_growth_fears/http://www.boston.com/business/markets/articles/2004/07/24/dow_stumbles_on_growth_fears/
Dow stumbles on growth fears
Disappointing earnings also drive decline of index
By Andrew Caffrey, Globe Staff | July 24, 2004
The Dow Jones industrial average closed below 10,000 for the first time in two months as disappointing earnings from major companies ranging from Coca-Cola Co. to Amazon.com to Microsoft Corp. raised fears of a slowing economy.
The Dow dropped 88.11 points, or about 1 percent to close at 9,962.22; it has now fallen almost 5 percent since the beginning of the year. The technology-heavy Nasdaq Composite index, meantime, dropped more than 2 percent, and at 1,849.09 is at its lowest trading point since October 2003.
"The suspicion is the economy has downshifted here, and profit momentum" from corporations "is flagging," said James Paulsen, the chief investment strategist at Wells Capital Management.
Yesterday's sell-off concluded the fourth straight week that the major indexes closed down, and Paulsen and others looked back to a weak jobs report from early July as a flashpoint for both worries about the state of the economy and the softening markets.
John Lynch, the chief market strategist for Boston mutual fund company Evergreen Investments, said the economy is in the midst of a traditional shift from the higher-growth phase earlier in a recovery, to the "boring" phase with more normal growth rates. But the ongoing fears of another possible terrorism attack, stoked by recent warnings from US government officials about potential targets that could include several election-related activities, are causing investors to react more strongly to any negative market news.
"Because of the fear of terror," Lynch said, investors see "the glass as half empty as opposed to half full."
Speaking of glasses, beverage giant Coke had the biggest stock drop yesterday, losing $3.80, or 7.7 percent, to close at $45.17 after it reported that volume sales in international markets were much lower than what analysts had expected.
Amazon reported quarterly profits that were a penny short of what analysts had forecast the company would earn in its second quarter, and its revenues for the period were also below expectations.
Shares of the pioneering online retailer lost $5.84 or 12.8 percent, to close at $39.98, even though Amazon increased its forecast for revenue for the remainder of the year.
Meanwhile Microsoft, followed its disclosure this week that it would distribute some $75 billion to shareholders over four years with news that it intends to hire as many as 7,000 employees. Yet investors instead cut 3.3 percent off the company's stock price that closing at $28.03 because the software giant said lower investment income would undermine its earnings performance.
The coming weeks could be instrumental in determining the direction of the market. The current concerns about terrorism will be tested with the two national political conventions in Boston and New York, and the Summer Olympics in Athens.
And on the economic front, the next employment report due out early next month will tell whether the pace of new jobs is continuing to ebb.
Andrew Caffrey can be reached at caffrey@globe.com.
© Copyright 2004 The New York Times Company
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