Another Rush for the Exits on Wall Street

Earnings woes and U.S.-China tensions sent stocks plunging. One analyst thinks investor confidence has suffered a total breakdown

Investors, unable to shake off another round of earnings warnings and mounting tension between the U.S. and China, sent stocks spiraling south on Tuesday, Apr. 3. Technology issues were hit especially hard. The Nasdaq Composite, down 6.2% for the day, slipped below the 1,700 mark -- a level not seen since Oct. 23, 1998. The blue-chip Dow Jones industrial average and broader Standard & Poor's 500 index each shed more than 3%.

"Today's decline has hurt the markets tremendously. It's a total breakdown as far as confidence is concerned," says Peter Cardillo, director of research at Westfalia Investments.

Alan Ackerman, market strategist at Fahnestock & Co., says investors still were deeply worried about earnings and revenue disappointments. "There's very little on the fundamental side to cause a buyer to step into the market now," Ackerman says. Better quarterly performances by companies may not come until late summer or early fall, he adds.

In the latest round of earnings warnings, software makers Ariba Inc. (ARBA ) and Broadvision Inc. (BVSN ) issued negative outlooks after Monday's close. Shares of Ariba and Broadvision finished down more than 30% and 31%, respectively, on Tuesday.

Also haunting the markets are rocky U.S.-China relations, Ackerman notes. American diplomats found 24 crewmembers of a downed U.S. plane -- which China charges was spying -- in good health, as the U.S. appealed for their quick release.

Looking ahead, both Ackerman and Cardillo say they're anticipating no surprises from Federal Reserve Chairman Alan Greenspan, who is scheduled to give a speech on Wednesday, Apr. 4, and from the government's March employment report on Friday, Apr. 6.

Cardillo adds that the market may finally turn around only after some dramatic action –- whether it be a total capitulation, aggressive action by the Federal Reserve, or substantial economic evidence that points to a reversal for corporate profits. The next Fed policy-setting meeting is scheduled for May 15. The Fed, so far, has slashed interest rates three times this year to help spark corporate and consumer spending.

The Dow index ended down 294.90 points, or 3.02%, to 9,483.03. Nearly all the Dow stocks ended lower. Among the biggest losers were techs, including Hewlett-Packard Co. (HWP ) and Microsoft Corp. (MSFT ). HP shed more than 6%, and Microsoft more than 5%.

The tech-heavy Nasdaq composite lost 110.34 points, or 6.19%, to 1,672.63 -- off nearly 71% from its peak a year ago. Meanwhile, the broader Standard & Poor's 500 index shed 39.47 points, or 3.44%, to 1,106.63.

Treasury Market

Treasuries ended higher, amid weakness in equities. In economic news, factory orders fell 0.4% in February to a seasonally adjusted $362.98 billion after tumbling 4.3% in January, the Commerce Dept. said. The February dip was led by a drop in demand for industrial machinery and transportation products. Excluding the volatile transportation sector, orders dipped 0.3% to to $321.31 billion.

Stocks in the News

Best Buy Inc. (BBY ) said sales of digital products like DVD players and cameras helped push fourth-quarter earnings up 16%, and the consumer electronics retailer said fiscal 2002 profits should top forecasts, according to press reports.

AOL Time Warner Inc. (AOL ) Chief Executive Gerald Levin said despite the current market climate, he's "very confident" about the ability of the Internet and media giant to meet the 2001 financial targets it laid out earlier this year.

PG&E Corp. (PCG ) and Edison International (EIX ) said they respectively expect to write off about $4.1 billion and may write off as much as $2.7 billion for electricity costs they may be unable to recoup.

World Markets

In Europe, the markets finished lower on earnings worries and fears that U.S. markets were headed lower. In London, the Financial Times-Stock Exchange 100 index ended down 155.40 points, or 2.77%, to 5,463.10. In Germany, the DAX Index lost 207.30 points, or 3.60%, to 5,553.46. In France, the CAC 40 shed 206.48 points, or 3.96%, to 5,004.

In Asia, the markets ended mixed. The Nikkei gained 186.61 points, or 1.44%, to 13,124.47, led largely by bank issues. In Hong Kong, the Hang Seng ended down 143.08 points, or 1.12%, to 12,584.22.

By Heesun Wee in New York

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