NEW YORK – Stocks plunged to lows unseen since early spring Wednesday as recurring uncertainties about the current downturn offset any positive sentiment generated by some reassuring gross domestic product data.
"There's still a lot of caution out there. The data is still very mixed," said Rich Nash, chief market strategist at Key Asset Management. "I think we stay still stuck in this sideways to slightly down-market until we see some indications that the economy is improving and corporate profits are going to rebound."
The blue-chip Dow Jones industrial average fell 131.13 points, or 1.28 percent, to 10,090.90, while the technology-laced Nasdaq Composite Index slipped 21.81 points, or 1.17 percent, to 1,843.17. The broader Standard & Poor's 500 Index dropped 12.95 points, or 1.11 percent, to 1,148.56, a close unseen since April 9.
The government's preliminary revision to second-quarter GDP showed that the economy grew at a 0.2 percent pace, well below a prior reading of 0.7 percent but above expectations for zero by economists polled by Reuters.
The data gave a psychological boost to the market in early morning trading, but the rally fizzled almost immediately.
Economic growth has ground virtually to a halt in the United States, a far cry from its 5.7 percent pace in the second quarter of last year, and the resulting corporate profit squeeze has sent investors dashing for the exits of a once-buoyant stock market.
Year-to-date the Nasdaq Composite index is down 24.5 percent, the Dow Jones Industrial Average is off 5.2 percent, and the S&P 500 is down 12 percent.
"I don't think any rally is going to be sustainable, this week anyway," said Charles Payne, market analyst at Wall Street Strategies. "There's no such thing as one good new item being able to single-handedly propel the market."
Wall Street was on shaky ground after a sharp drop in consumer confidence on Tuesday slapped major stock indexes lower. The drop stoked fears Americans would shut their wallets, depriving the U.S. economy of its main engine — consumer spending.
Juniper Networks, the network equipment maker, fell to a new 52-week low of $15.28 on the Nasdaq after Merrill Lynch cut its 2002 earnings forecast for the firm by more than 16 percent and its 2001 earnings view by nearly 4 percent. Juniper was down 85 cents at $15.85, or more than 5 percent.
Downbeat comments from Wall Street powerhouse Merrill Lynch hurt a number of marquee high-tech companies. Joining Goldman Sachs a day earlier, Merrill on Wednesday cut its 2002 outlook for the maker of computers and software for data networking, citing anemic demand.
Personal computer maker Gateway Inc. rose 19 cents to $8.79 after it said it will cut about a quarter of its global work force, taking a $475 million third-quarter charge and shutting operations in Asia and possibly in Europe. It added it expects to be marginally profitable for the second half of 2001 on a pretax basis, excluding special charges.
Juniper Networks , the network equipment maker, fell $1.16 to $15.54 after hitting a new 52-week low of $15.28 on the Nasdaq.
Telecom equipment stocks were under pressure after research group Gartner Dataquest said shipments of mobile phones fell sharply in the second quarter. Nokia Corp. shed 67 cents to $16.13, after hitting a new year low at $16.02. Dataquest said the Finnish mobile phone maker lost some market share to Sweden's Ericsson and U.S.-based Motorola. Ericsson slipped 11 cents to $5.25 and Motorola Inc. declined 34 cents at $18.31.
One bright spot in the market's bleak landscape was the oil sector, which got a boost after a U.S. government report that confirmed industry data showing a hefty draw in gasoline inventories.
Stocks of oil-refining companies also rose after Lehman Brothers raised its ratings on five sectoral firms to "strong buy" from "market perform." It upgraded Frontier Oil Corp., Sunoco Inc., Tesoro Petroleum Corp., Ultramar Diamond Shamrock, and Valero Energy. All those stocks moved higher on the New York Stock Exchange with Frontier up $1.52 at $17.03, and Valero up $2.24 at $40.85.
Two announcements after the market closed gave little cause for rejoicing. Fiber optics manufacturer Corning said it was cutting 1,000 jobs because of a sudden slowing in orders across all fiber product lines. The stock was down 60 cents, or 4 percent, at $14 in extended trading, adding to a regular session loss of 79 cents.
And Sun Microsystems said it is unlikely it will break even in the first quarter because of soft business. The maker of computer storage and other products dropped 57 cents to $12.86 in the late session, compounding a 13-cent decline during the day.
In the latest merger news, forest products companies Mead Corp. and Westvaco Corp. said they plan to merge in a $3 billion stock swap, combining two mid-size players in the rapidly consolidating paper industry. Mead rose $1.99 to $32.17, while Westvaco gained $2.09 to $29.75.
Israeli telecommunications software maker Comverse Technology Inc. fell 8.76 percent, down $2.50 to $26.05, after posting a 20 percent drop from a year ago in its earnings before one-time charges.
Trading volumes were typically light, with many investors out on vacation to enjoy the last days of summer and take advantage of the long Labor Day weekend. About 966 million shares traded hands on the New York Stock Exchange, while 1.45 billion shares were traded on the Nasdaq.
"Buyers are on vacation," said Jeff Kleintop, chief investment strategist at PNC Advisors, adding that the Street needs more economic data "to get a better feel whether there is the possibility of a recovery in the second half" of 2001.
The Russell 2000 index, which tracks the performance of smaller company stocks, fell 0.86 to 473.34.
Overseas markets were mixed Wednesday. Japan's Nikkei stock average finished the day down 1.9 percent. Germany's DAX index was down nearly 0.1 percent, France's CAC-40 rose 0.4 percent, and Britain's FT-SE 100 declined 0.3 percent.
Reuters and the Associated Press contributed to this report.