Wall Street Turns Thumbs Down on Bush Speech
Despite President Bush's call for stiffer penalties for corporate criminals and a crackdown on boardroom scandals, stocks -- led by chips and pharmaceuticals -- stretched losses late into the regular trading session to finish lower Tuesday.
In a speech on Wall Street, the President said his administration would "end the days of cooking the books, shading the truth and breaking our laws," according to news reports.
Bush also called on the U.S. Sentencing Commission to recommend longer prison terms for corporate executives guilty of fraud and announced a new task force for the pursuit and prosecution of corporate criminal activity. The task force would be headed by Deputy Attorney General Larry Thompson and include investigators from the Department of Justice and other agencies.
As if accounting and corporate scandals weren't enough to deal with, the markets were digesting more disappointing earnings news -- particularly in the technology sector. Merrill Lynch downgraded some semiconductor equipment issues. Merrill lowered the boom on the chipmakers by cutting its estimates for 2003 earnings on a number of different firms, according to S&P. The brokerage stated that slower than expected growth from weak PC, consumer, and information technology spending all conspired against the sector.
Plus, Salomon Smith Barney cut its earnings-per-share forecast for chipmaker Intel (INTC ), citing problems with the mix of sales of its computer chips, according to news reports.
Among other stocks in the news, U.S. drugmaker Wyeth (WYE ) tumbled more than 24% after a study showed that women taking Prempro, the company's hugely popular hormone replacement drug, had increased risk of breast cancer, stroke and heart disease. Other pharmaceutical shares also were hit.
The Dow Jones industrial average lost 182.76 points, or 1.97%, to 9,092.14. The tech-heavy Nasdaq composite index slipped 24.47 points, or 1.74%, to 1,381.14. And the broader Standard & Poor's 500-stock index was down 24.26 points, or 2.48%, to 952.72. Among the losers were semiconductors, while telecoms posted gains.
U.S. Treasuries closed higher, as equities weakened late into the session. Treasuries saw some buying interest as equities showed a little disappointment following President Bush's speech, taking on a "show me" attitude, according to S&P. Traders added it's going to take action, not just words, to restore investor confidence.
European markets ended lower. In London, the Financial Times-Stock Exchange 100 index was down 58.40 points, or 1.27%, to 4,542.90, taking a cue from U.S. stocks. In France, the CAC 40 shed 39.34 points, or 1.02%, to 3,819.01. And in Germany, the DAX Index lost 72.57 points, or 1.63%, to 4,369.76. In economic news, German unemployment rose 39,000, to a 9.8% rate in June from 9.7% in May, while German industrial production fell 1.3% in May, which was worse than expected.
In Asia, the markets finished higher, on hopes the U.S. economy would recover. Stability in the currency market also supported equities. The Nikkei gained 191.05 points, or 1.77%, to 10,960.25. In Hong Kong, the market added 39.70 points, or 0.37%, to 10,843.15.