Updated from 4:35 p.m. EDT
Sellers crushed stocks on Friday, sending the
Dow Jones Industrial Average to its lowest close since October 1998, as a criminal probe at a major drug company and weak outlooks from the tech sector set a negative tone that worsened throughout the day.
The Dow finished with a loss of 390.23 points, or 4.6%, to 8019.26. With the decline, the Dow has now gone through the intraday low of 8062 it hit when trading resumed following the Sept. 11 terrorist attacks. The industrials traded as low as 7966.72 just minutes before the close. All told, the Dow had its seventh-largest point decline ever.
Nasdaq fell 37.88 points, or 2.8%, to 1319.07, and the
S&P 500 dropped 33.81 points, or 3.8%, to 847.75.
With the Dow down about 665 points this week, or 7.7%, many wondered if bargain-hunters would eventually materialize.
"We might be getting near capitulation," said Peter Blatchford, a trader at Miller Tabak. "It is hard to say."
"When people get home tonight and look at their 401Ks, they will probably say they have had enough," said Blatchford. "That means the flush could be coming in the next few days."
While several technology companies issued weak earnings outlook Thursday night, it was the blue-chip Dow that bore the brunt of Friday's carnage, bringing it into line with the Nasdaq's recent travails.
"I am not really sure what the catalyst is to stop this market from going lower," said Bob Basel, a trader at Salomon Smith Barney. "Every day, the market seems like it just wants to head down."
The earnings cavalcade continued but the forecasts were far from rosy. Software giant
fell 3% to $49.56 a day after reporting fourth-quarter results that beat Wall Street estimates by a penny. But the company also lowered guidance for 2003.
The company said it earned $1.53 billion, or 28 cents a share, in the latest quarter, including a charge for investment impairments of $806 million, or 15 cents a share. Excluding the charge, Microsoft posted a profit of 43 cents a share, compared with a year-ago profit of a penny a share.
returned to profitability, reporting fiscal fourth-quarter earnings that were in line with analysts' expectations. But the company said it expects to continue its losing ways for the current quarter, as the technology spending slump lingers.
The Unix-systems maker posted a profit, excluding an $18 million loss on equity investments, of $20 million, or a penny a share, reversing a year-ago loss of $88 million, or 3 cents a share. Revenue for the quarter fell to $3.4 billion from $4 billion, a year ago. Shares fell 27% to $4.25 on the outlook.
The telecommunications sector suffered another blow as
set plans to cut 5,000 jobs and reported a loss of $296 million for the second quarter. The company also disclosed plans to raise $3.25 billion through the offering of 8 billion new shares. Investors weren't happy with the company's profitability timeline, or the fact that it gave little reason to believe the telecom industry is near a turnaround. The stock dropped 17% to $1.26.
Meanwhile, online auction house
turned in a strong second-quarter performance, reporting higher sales and earnings. The company posted a profit of $54.3 million, or 19 cents a share, compared with $24.6 million, or 9 cents a share, in the year-ago period. Revenue for the quarter rose to $266.3 million from $180.9 million.
The results were better than expected but had already been revealed when the company announced it would purchase
. The downside of the report was that eBay said it wouldn't meet revenue forecasts for the third quarter, but the company did raise its earnings guidance for the full year. Still, shareholders focused on the negatives, sending the stock down 1.5% to $59.55.
Elsewhere, shares of
Johnson & Johnson
lost 16% to $41.85 after the company confirmed federal regulators have launched a criminal investigation into one of its factories in Puerto Rico. Regulators are worried about an increase in a serious blood disease in Europe and Canada and the potential it is connected to an anemia treatment made at the J&J plant.
J&J believes the probe, which is being conducted by the Food and Drug Administration and the Justice Department, came about after a former utility worker at the plant said the company had poor record-keeping practices at the facility.
Computer storage networking companies
posted better-than-expected quarterly results, enabling them to escape the early morning selloff that hit pretty much every sector. By the end of the day though, only McData was in the green, closing up 16%. QLogic fell 1.3%.
On the economic front, the Labor Department said its
consumer price index, a key inflation gauge, rose 0.1% in June after showing no change in May. The core rate, which excludes the volatile food and energy components, also rose 0.1% following 0.2% increase the previous month. The numbers were slightly below economists' expectations.
Separately, the U.S. trade deficit rose to a record-setting $37.64 billion in May as a result of consumer demand for imported automobiles, food and consumer goods, the Commerce Department said. Economists were expecting the data to show a $35.23 billion trade gap.
U.S. Treasury issues were climbing around 4 p.m. EDT. The 10-year note was up 19/32 at 102 19/32, yielding 4.534%. The bond was gaining 1 4/32 to 100 21/32, yielding 5.330%.
Overseas markets were sharply lower. London's FTSE 100 lost 4.6% at 4098, and Germany's Xetra DAX was down 5.1% at 3892. Japan's Nikkei 225 fell 2.8% to 10,202, while the Hang Seng closed down 1.2% to 10,325.