-Caveat Lector-
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From: [EMAIL PROTECTED]
Date: July 27, 2007 9:49:53 PM PDT
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Subject: Worst week for the Dow and the S&P 500 index in 5 years
Dow industrials and S&P 500 index conclude
worst week in 5 years; Dow sheds 208 Friday
By TIM PARADIS
AP Business Writer
http://hosted.ap.org/dynamic/stories/W/WALL_STREET?
SITE=WSAW&SECTION=HOME&TEMPLATE=DEFAULT
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Stocks Deepen Decline to Cap Rough Week
NEW YORK (AP) -- Wall Street extended its steep decline Friday,
propelling the Dow Jones industrials down more than 500 points over
two days after investors gave in to mounting concerns that
borrowing costs would climb for both companies and homeowners. It
was the worst week for the Dow and the Standard & Poor's 500 index
in five years.
Investors cast aside a stronger-than-expected read on the economy
and maintained negative sentiment that dominated Thursday when the
market shuddered amid worries over the U.S. mortgage and corporate
lending markets. Investors globally took flight from equities,
shifting cash into safer investments in Treasury bonds.
The pullback Thursday and Friday wiped out $526.1 billion in
shareholder wealth from the stocks in the Standard & Poor's 500 index.
Although the market has often rebounded after a steep drop - and
has done so in recent weeks - investors appeared unable Friday to
set aside their concerns about a weakening housing market and
tightening credit.
A Commerce Department report that the U.S. gross domestic product
rose at a better-than-expected pace in the second quarter appeared
to do little to quell investors' unease Friday. GDP increased at a
3.4 percent annual rate, indicating that the drag from the housing
sector lessened. Economists had expected an increase of 3.3 percent.
Although the GDP reading might have reassured investors that the
economy was more than holding up even with soaring fuel prices, it
could also raise the possibility that the Federal Reserve, ever
vigilant about inflation, might put off a rate cut or even raise
rates. Higher rates would exacerbate the market's intensifying
concerns about credit.
"I think people are really cautious right now. We're seeing the
convergence of a whole host of sort of unrelated or only slightly
related issues," said Randy Frederick, director of derivatives at
Charles Schwab & Co. He contends market volatility will remain as
investors sort through issues such as the availability of credit
for corporate buyouts, soured subprime mortgages and rising energy
prices.
The Dow fell 208.10, or 1.54 percent, to 13,265.47, with nearly 140
points of that loss coming in the final half-hour of trading. For
the week, the index fell more than 585 points, or 4.23 percent. The
week's point decline was the worst in five years, while the
percentage decline was the largest since late March 2003.
The Dow, which had seen back-and-forth sessions before the declines
Thursday and Friday, only last week traded above 14,000 for the
first time. The Dow's retrenchment leaves it 756 points below its
high from last week. That 5.4 percent decline puts it more than
halfway toward the technical threshold of a correction, which is 10
percent.
Broader stock indicators also fell Friday. The S&P 500 ended down
23.71, or 1.60 percent, at 1,458.95. For the week, the S&P gave up
4.90 percent. It was the S&P's worst performance, in percentage
terms, since the week ended July 19, 2002.
The Nasdaq composite index fell 37.10, or 1.43 percent, to
2,562.24. It was down 4.66 percent for the week, marking the
index's worst run since the stock market had a pullback that began
Feb. 27.
Small stocks took an especially devastating blow during the week,
in part because the global economy is growing faster than that of
the United States. Investors often regard profits at larger
companies as more likely to hold up amid a U.S. slowdown because
much of their business is drawn from overseas.
The Russell 2000 index of small-capitalization stocks fell 13.65,
or 1.72 percent, to 777.83. For the week, the index dropped 7.01
percent, the most since September 2001.
Declining issues outnumbered advancers by more than 2 to 1 on the
New York Stock Exchange, where consolidated volume came to a heavy
4.82 billion shares compared with a record 5.84 billion shares seen
Thursday.
Bonds added to a huge advance logged Thursday as investors clearly
sought the relative safety of Treasurys. The yield on the benchmark
10-year Treasury note fell to 4.77 percent from 4.79 percent late
Thursday. The dollar was mixed against other major currencies,
while gold prices fell.
Light, sweet crude settled up $2.06 at $77.01 per barrel on the New
York Mercantile Exchange, just a penny shy of its all-time high.
"I think we're going to have continued sideways movement with 100
point up-and-down days," said Frederick, referring to the Dow's
back-and-forth movements.
"The 14,000 level is going to be tough for this market to get back
above," Frederick said.
Still, he said investors shouldn't overreact to the moves, in part
because of the gains stocks have logged this year. Before
Thursday's decline, the Dow was up 10.6 percent for the year, while
the S&P had gained 7.04 percent and the Nasdaq 9.64 percent.
"You look at a 300-point Dow day and it seems like a big day, but
from a percentage viewpoint it's not a big move," Frederick said.
The volatility that has taken up residence on Wall Street in recent
days has perhaps exacerbated concerns of investors grown accustomed
to the largely calm markets of recent years. The Chicago Board
Options Exchange's volatility index, known as the VIX, and often
referred to as the "fear index," jumped Thursday and rose again
Friday to its highest level since April 2003.
"My basic belief is that we're in an environment where we're going
from extremely low volatility toward normal - from extremely low
credit spreads and perception of risk toward normal," said Bart
Geer, portfolio leader of the $3.9 billion Putnam Equity Income Fund.
"You can't have all bull markets all the time. Markets go up and go
down. The reason you're well paid in equities is because they do.
This is all part of the process."
There was little corporate earnings news for traders to mull over,
with about half the Standard & Poor's 500 index already having
posted results over the past few weeks.
The biggest earnings news came from Chevron Corp., which reported
second-quarter profit climbed 24 percent to surpass analyst
estimates as the second largest U.S. oil company cashed in on
higher gasoline prices. [Even] Chevron fell $2.26, or 2.6 percent,
to $85.20.
Evidence that not all private-equity deals have screeched to a halt
came as Lee Equity Partners LLC struck a deal to acquire retailer
Deb Shops Inc. for about $391.1 million. Deb fell 17 cents to $26.51.
Also, medical device maker Medtronic Inc., seeking to expand its
spinal products business, said it would acquire device maker Kyphon
Inc. for $3.9 billion. Kyphon jumped $12.92, or 24 percent, to
$66.60. The stock rose as high as $68.40, moving above its previous
52-week high of $57.10. Medtronic slipped 11 cents to $50.81.
Most Asian markets fell Friday in reaction to the market plunge,
while European markets - which were open during part of the big
U.S. drop Thursday - showed more modest moves Friday. Japan's
Nikkei stock average closed down 2.36 percent, while Hong Kong's
Hang Seng index fell 2.76 percent. Britain's FTSE 100 fell 0.58
percent, Germany's DAX index dropped 0.76 percent, and France's
CAC-40 fell 0.55 percent.
---
The Dow Jones industrial average ended the week down 585.61, or
4.23 percent, at 13,265.47. The Standard & Poor's 500 index
finished down 75.15, or 4.90 percent, at 1,458.95. The Nasdaq
composite index ended down 125.36, or 4.66 percent, at 2,562.24.
The Russell 2000 index finished the week down 58.61, or 7.01
percent, at 777.83.
The Dow Jones Wilshire 5000 Composite Index - a free-float weighted
index that measures 5,000 U.S. based companies - ended Friday at
14,710.78, down 795.70 for the week. A year ago, the index was at
12,634.11.
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