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Stocks Fall on Terror Worries

The major indexes pull back on the eve of the second anniversary of 9/11 and release of a videotape of Bin Laden. Treasury bonds rally.

September 11, 2003|From Times Staff and Wire Reports

Stocks on Wednesday suffered their biggest pullback in at least a month as some investors turned anxious ahead of today's anniversary of the 2001 terrorist attacks.

Treasury bonds rallied, driving yields to their lowest levels since early August.

The stock market's sell-off accelerated after Arabic TV network Al Jazeera showed a new videotape of Al Qaeda leaders Osama bin Laden and Ayman Zawahiri. They threatened more attacks on the United States.

The technology-dominated Nasdaq composite slumped 49.62 points, or 2.7%, to 1,823.81, the largest one-day loss since the index fell 2.9% on July 17.

The Dow Jones industrial average ended down 86.74 points, or 0.9%, at 9,420.46, and the Standard & Poor's 500 fell 12.25 points, or 1.2%, to 1,010.92. The losses were the biggest for those indexes since Aug. 5.

Losers swamped winners by 2 to 1 on the New York Stock Exchange and by nearly 3 to 1 on Nasdaq, in heavy trading.

The anniversary of the attacks that destroyed the World Trade Center "was heavy on everyone's mind anyway," and the tape on Al Jazeera just added to the gloom, said Art Hogan, chief market analyst at brokerage Jefferies & Co. in Boston.

The drop in share prices is a "legitimate reaction to when we're reminded of the horror and the terror that's still out there," Tom Hudson, who helps manage $30 billion for Lord Abbett & Co. in Jersey City, N.J., told Bloomberg News.

But given the market's run-up of the last four weeks, pushing major indexes to one-year highs, many analysts have said that a selling bout was inevitable. The market has fallen in three of the last four sessions.

The tech sector, which has led Wall Street's rally since mid-March, was under pressure after Texas Instruments slumped despite an upbeat outlook from the company. Late Tuesday the semiconductor giant said sales in the current quarter would come in at the high end of its previous forecast.

TI shares slid $1.90, or 7.5%, to $23.42, and other chip stocks also tumbled.

Brokerages Goldman Sachs and Morgan Stanley told clients that Texas Instruments' improved outlook already was priced into its stock.

But another chip company, TriQuint Semiconductor, rallied in after-hours trading after its announcement that sales this quarter and next would beat expectations. TriQuint fell 45 cents to $5.68 in regular trading, then jumped to $6.14 after hours.

Also gaining in after-hours trading was software firm Adobe Systems after it said net income surged 37% in the quarter ended Aug. 29. The stock fell $1.64 to $36.29 in regular trading, then rose to $38.37 after the earnings report.

The action in those shares suggests that many investors remain eager to buy into the market, and that others are reluctant to sell, because of strong expectations that corporate earnings will continue to rise into 2004, analysts said.

Despite the risk of more profit taking in the near term, Hogan said, "I definitely think there's a floor under this market."

In other trading Wednesday, Treasury bond prices rose as some safety-seeking investors jumped into the securities. Strong demand at the government's sale of $16 billion in new five-year notes also helped sentiment. The notes were sold at a yield of 3.23%.

The benchmark 10-year T-note yield dropped to 4.27% from 4.36% on Tuesday. The 10-year yield is the lowest since Aug. 8 and is down from the recent peak of 4.60% on Sept. 2.

Gold fell back after rising Tuesday to its highest level in nearly seven years. Near-term futures in New York lost $1.70 to $380 an ounce.

Among the day's highlights:

* Chip stocks falling sharply included Broadcom, down $1.55 to $25.91; Micron Technology, off $1.35 to $13.35; and National Semiconductor, down $1.57 to $32.23.

* Bank and brokerage stocks were weak. Comerica fell $1.12 to $47.46, National City lost $1.51 to $30.30, Washington Mutual slid $1.67 to $37.19, and Merrill Lynch fell $1.58 to $52.73.

* Drug stocks, which have performed poorly in recent months, attracted buyers. Merck gained 91 cents to $53.70, and Aventis rose $1.16 to $54.07.

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