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Tuesday, Sept. 24, 2002

No relief is expected from the Federal Reserve Board, which is to meet today to consider interest rates. Wall Street doesn't expect any change in Fed rate policy.

The blue-chip Dow Jones industrial average fell 113.87 points, or 1.43 percent, to 7,812.15, having risen 43.63 points Friday. The tech-heavy Nasdaq composite index slid 36.15 points, or 3 percent, to 1,184.94, its lowest close since it reached 1,165.81 on Sept. 12, 1996.

The broader New York Stock Exchange composite index fell 5.19 points to 453.78. The Standard & Poor's 500 index fell 11.69 points to 833.70. The American Stock Exchange composite index was knocked down 9.60 points to 831.54, and the Wilshire 5000 Index fell 114.99 points to 7,908.19.

Big Board volume was an estimated 1.36 billion shares. Nasdaq volume reached 1.43 billion shares.

Oil Reaches 19-Month High

Stocks fell in early morning trade as crude oil jumped, as the United States was seen as being a step closer to armed conflict with Iraq. Oil climbed to a 19-month high of $30.48 a barrel as Iraq said it would defy U.N. resolutions.

Meanwhile, some ministers and top officials of the Organization of Petroleum Exporting Countries indicated that the bloc wouldn't necessarily raise output if prices break through its band, if war fears rather than fundamentals are driving the increase.

Rather they want to wait to see how prices react on a sustained basis before acting on supplies.

Shares were also pressured by a sales warning from fiber-optic network supplier JDS Uniphase. The company warned that its sales for the quarter ending this month will be 5 percent below earlier guidance because of continuing weakness in telecom development.

Economic news also hurt stocks. The Conference Board said its measure of future economic activity fell for a third month during August, indicating that the weak economic recovery could stall.

The board said its composite index of leading economic indicators fell 0.2 percent to 111.8 in August, after declining 0.1 percent in July and 0.2 percent in June. Most economists on Wall Street were expecting the gauge of the economy's performance over the next three to six months to decline 0.1 percent.

Morgan Stanley cut its 2002 and 2003 earnings estimates for the Standard & Poor's 500 components due to the muted U.S. economic recovery. Morgan Stanley said in a research note that it cut its 2002 earnings outlook for the S&P 500 to $47.50 a share from $50 and lowered its 2003 estimate to $55 a share from $58.

The investment bank also restored its underweight rating on the financial sector as it has outperformed the S&P 500 by more than 500 basis points so far this year.

It said the sector has already seen most of the benefits from a steep yield curve and an accommodative Fed.

Banc of America Securities raised the equity portion of its model investment portfolio to 65 percent of assets from 60 percent and cut bond holdings to 25 percent from 30 percent. Cash holdings remained unchanged at 10 percent.

"Stock prices are still vulnerable to downward guidance and negative surprises," the firm said in a research report.

"Despite that vulnerability, we believe that investors should prepare to place more of their capital at risk in the stock market," Banc of America said.

No Help Expected From Fed

The policy-making Federal Open Market Committee will be meeting this morning, but few investors expect the Fed to cut rates from the current 1.75 percent to boost the economy. The Fed funds rate has held steady since December 2001.

U.S. Treasury prices jumped. The 10-year bond rose 22/32 to 105 17/32. Its yield, which moves in the opposite direction of its price, dropped to 3.70 percent from 3.78 percent late Friday.

In Europe, stock prices ended substantially lower in moderate trading in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index lost 120.70 points, or 3.13 percent, to 3,739.40. The German DAX index fell 151.48 points, or 4.94 percent, to 2,914.25, and the French CAC-40 index fell 96.51 points, or 3.34 percent, to 2,794.31.

Trouble in Germany

European stocks fell amid growing concerns over what the narrow victory by Chancellor Gerhard Schroeder will mean for Germany's economy. Schroeder won the election by the narrowest of margins. Analysts fear much-needed labor market and tax reforms to jump-start the economy, Europe's biggest, could be hampered.

The region's markets were also pressured by higher oil prices, concerns over the Middle East and the early fall on Wall Street.

Earlier in Asia, prices on the Hong Kong Stock Exchange ended lower for a fourth consecutive session, pressured by concerns of a Middle East war and local economic worries. The blue-chip Hang Seng Index, which lost 99.57 points Friday, slipped another 13.35 points, or 0.14 percent, to 9,314.87, its lowest close since Sept. 25, 2001.

Analysts said the market came under pressure from weakness in the property sector as sales of residential flats appeared to be slowing down.

Weekend flat sales had picked up in the first half of the year, but analysts said they have begun to taper off in recent weeks as potential house buyers worry over growing job insecurity.

Prices also declined in South Korea. The Kospi Composite Index fell 24.69 points, or 3.5 percent, to 679.43. Markets in South Korea were closed on Friday for a national holiday.

Analysts said stocks were pressured by concerns over the Middle East and weakness in oil stocks.

Prices fell to their lowest level since last November on the Taiwan Stock Exchange. The Weighted Index, which lost 62.06 points Friday, dropped another 100.85 points, or 2.3 percent, to 4,328.40.

Elsewhere in the Pacific, prices ended lower on the Australian Stock Exchange amid continued concerns over the Middle East and U.S. economic growth.

The blue-chip All Ordinaries Index, which fell 23.90 points Friday, lost another 26.20 points, or 0.9 percent, to 3,001.00.

Trading activity was light ahead of today's U.S. Fed meeting.

Markets in Japan were closed for a national holiday. Trading will resume today.

Copyright 2002 by United Press International.

All rights reserved.

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