Tuesday October 30 3:16 PM ET
Stocks Fall as Consumer Confidence Sinks
By Haitham Haddadin
NEW YORK (Reuters) - Stocks slumped across the board in late afternoon trading on Tuesday as the biggest plunge in consumer confidence in more than seven years raised fears of cutbacks in spending by the economy's driving force.
Investors were spooked by the latest economic data showing fading consumer confidence in October in the wake of last month's deadly attacks. This could undermine consumer spending, which drives two-thirds of activity in an economy that many economist believe is already in recession.
Adding to the gloom, U.S. Attorney General John Ashcroft (news - web sites) late on Monday warned that militants may be plotting new attacks on the United States and abroad in the next week.
``Today's number was no pleaser ... I sit here and I stare at my screen and all I see is one lay off announcement after another,'' said Donna Van Vlack, director of trading at Brandywine Asset Management, which manages $7 billion. ``The world is a very unsafe place job-wise and terror-wise and a cautious stance is definitely merited more now than it has been.''
Stocks opened on a weak note amid dour outlooks or earnings from companies like drugstore chain CVS Corp. (NYSE:CVS - news) , concern that Argentina will default on its $132 billion debt and fear of more deadly attacks on the United States.
Investors are bracing for a raft of other economic reports this week expected to be of the bleak variety. They include important third quarter reading for the U.S. Gross Domestic Product (GDP (news - web sites)) which is expected to show the world's largest economy shrank 1 percent in the July-September period. This could point to a recession, informally defined as at least two consecutive quarters of negative GDP readings.
The Dow Jones industrial average (^DJI - news) plunged 149.24 points, or 1.61 percent, to 9,120.26. The broader Standard & Poor's 500 Index (^SPX - news) was down 16.71 points, or 1.55 percent, at 1,061.59. The technology-laced Nasdaq Composite Index (^IXIC - news) lost 29.48 points, or 1.73 percent, at 1,670.04.
Earlier the Dow fell about 2 percent and Nasdaq lost 3 percent. The indexes cut losses on some bargain hunting.
``There was broad selloff this morning and I imagine that you will see people looking to establish positions at this lower level,'' said Rick Meckler, president of investment firm LibertyView, which oversees $1 billion.
Juniper Networks Inc. (Nasdaq:JNPR - news) lost 58 cents to $23.42 after Merrill Lynch cut its rating on the network equipment maker after its shares more than doubled in the last month.
CVS Corp plunged more than 25 percent on a 16 percent drop in earnings and the closing of 200 drugstores. CVS, the second most active on the New York Stock Exchange (news - web sites), fell $7.92 to $23.70.
Verizon Communications (NYSE:VZ - news), the No. 1 U.S. local telephone, posted a 46 percent drop in income due to the weak economy. Verizon fell 64 cents to $49.55.
Openwave Systems Inc (Nasdaq:OPWV - news) dropped nearly 16 percent, or $1.42 to $7.57, after the communications software provider warned of disappointing results and was slashing jobs.
McDonald's Corp. (NYSE:MCD - news), off $1.68 at $25.60, dragged on the Dow after the world's largest fast-food restaurant company projected 2002 earnings below Wall Street's forecasts.
Dow component Philip Morris Cos. Inc. (NYSE:MO - news), the world's largest tobacco company, dropped $1.87 to $47.81. Investment house Goldman Sachs removed Philip Morris from its recommended list, saying profit growth is likely to slow at its domestic and international tobacco operations.
Stocks sank on Monday after posting big gains last week on hopes that lower interest rates and more tax cuts will revive the economy by 2002. Many economists are betting on an economic bounce next year, but they warn of grim news in the meantime.
U.S. consumer confidence (news - web sites) plummeted in October to its lowest in more than seven years as growing numbers of Americans lost their jobs, according to a survey conducted after the Sept. 11 attacks on the United States.
The Conference Board (news - web sites), a private business research group, said its index of consumer confidence plunged for a fourth straight month to 85.5 in October, its lowest since February 1994. The report, which was much worse than Wall Street expectations for a fall to 95.6, said a rebound in confidence was not likely any time soon.
``This measure of confidence very much closely follows the job market and peoples' feeling of job security or insecurity,'' said Stuart Hoffman, chief economist at PNC Financial Services Group. ``It likely reflects the large number of layoffs in the past month and probably foreshadows an employment report for October on Friday that will be quite weak.''
Indeed, economists expect the October jobs report due on Friday will show the loss of 289,000 jobs, vs. 199,000 in September, and the unemployment rate will jump to 5.2 percent from 4.9 percent.
In earnings-related moves, Macrovision Corp. (Nasdaq:MVSN - news) tumbled 26.50 percent after the maker of copyright protection software posted higher profits but said it saw no growth in the next quarter. Macrovision fell $8.87 to $24.60.
