Wall Street sells off again, despite Bush crackdown
Investors sent stocks sharply lower for a second consecutive session today as worries about second-quarter earnings reports overshadowed President George W. Bush’s proposal to increase the penalties for corporate fraud.
The losses, which followed a sell-off yesterday, erased much of Friday’s big rebound rally. Analysts said that after months of accounting scandals and disappointing financial results, it will take more than a few words to convince investors that it is safe to come back to the market.
‘‘We’re just coming into earnings season now,’’ said Will Braman, chief investment officer, John Hancock Funds.
‘‘It’s time for ’show us the money,’ and investors’ expectations are not very high. There is a lot of scepticism. The numbers we get are going to be pawed over and looked at very critically.’’
The Dow Jones industrial average closed down 178.81, or 1.9%, to 9,096.09, according to preliminary calculations. It was the average’s second triple-digit decline this week, for a total loss of 283.41 that wiped out much of Friday’s 324-point rebound. Stocks had pulled back Monday as investors collected profits.
Broader stock gauges also retreated today. The Standard & Poor’s 500 index fell 24.15, or 2%, to 952.83, and the Nasdaq composite index lost 24.47, or 1.7%, to 1,381.14. This week alone, the Nasdaq has tumbled 4.6%.
Bush called for longer prison sentences for executives who defraud the public and stronger powers for the Securities and Exchange Commission. He also wants to put together a task force to pursue and prosecute corporate fraud.
His remarks came in response to scandals at companies ranging from Enron to WorldCom that have cost investors billions of dollars. Investor confidence, already fragile because of the economic slump, has further declined amid the reports of accounting irregularities, contributing to the stock market’s malaise.
Bush’s comments failed to convince disillusioned investors that better days were ahead, however perhaps because it’s too soon to tell whether his proposals will be implemented.
Analysts also said investors were reluctant to make any big commitments without more earnings information. Second-quarter reports are due out later this month, and, after two years of losses, most on Wall Street are unwilling to make many bets.
‘‘When we start to get some earnings, that should give the market a reason to move,’’ said Bill Meade, managing director, RBC Capital Markets.
Pharmaceutical company Wyeth plummeted dlrs 11.94, or 24.3%, to dlrs 37.70 on word that a government study had found the long-term use of hormone therapy by women significantly increased the risk of breast cancer, strokes and heart attacks. Wyeth makes Prempro and other estrogen supplements used in hormone therapy.
The selling spread to other drug companies, including Merck, which had fallen Monday on concerns about its accounting methods. Merck lost dlrs 2.06 to dlrs 45.75.
In the tech sector, semiconductor stocks pulled back after Merrill Lynch and Deutsche Bank reduced their forecasts for many companies in the group, citing weak order prospects. Applied Materials dropped dlrs 1.28 to dlrs 17.72, while Texas Instruments lost 85 cents to dlrs 23.30. Bellwether Intel slid 54 cents to dlrs 17.96.
Retail stocks were more mixed. Pacific Sunwear rose dlrs 2.01 to dlrs 24.48 after the retailer increased its second-quarter earnings forecast. But drugstore chain CVS fell 88 cents to dlrs 28.51 despite reporting that June sales at stores open at least a year rose 9.1 percent from the previous year.
Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume came to 1.34 billion shares, compared with 1.16 billion Monday. Decliners led advancers 5 to 4 on the Nasdaq Stock Market.
The Russell 2000 index fell 4.36 to 429.25.
