BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific

BBC News World Edition
 You are in: Business  
News Front Page
Middle East
South Asia
Market Data
Talking Point
Country Profiles
In Depth
BBC Sport
BBC Weather
Monday, 22 July, 2002, 20:31 GMT 21:31 UK
Dow Jones closes below 8,000
Chicago Board Options Exchange traders
The new week is full of uncertainties
America's Dow Jones index has closed below 8,000 for the first time since October 1998 as investors' worries about profits and probity at USA Inc continue to grow.

"I'm an optimist... I believe the future is going to be bright

President George W Bush
By the close in New York, the Dow Jones industrial average was down 2.93% or 234.82 points at 7,784.44.

The last time the Dow was this low was in October 1998. In other words, all of the gains made in the explosion of the late 1990s have now been wiped out.

As for the technology-heavy Nasdaq Composite - whose gains have long since evaporated - it finished the day at 1,282.65, down 2.77% and sitting at its worst close since May 1997.

The US losses reflect the picture seen around the world, after markets in London, Frankfurt and Paris lost about 5% apiece amid fears that insurers are selling shares hard to make sure their assets are worth enough to cover claims.

The nervous opening followed a dismal week which had seen hundreds of points wiped off most major indices, with Friday alone producing a near 400-point fall on the Dow.

Monday markets, 2010 GMT
New York's Dow
closed down 234.82 points or 2.93%
New York's Nasdaq
down 36.5 points or 2.77%
New York's S&P 500
down 27.91 points or 3.29%
London's FTSE
closed down 202.8 points or 4.95%
Frankfurt's Dax
closed down 200.45 or 5.15%
Paris' Cac
closed down 174.35 points or 5.25%
Tokyo's Nikkei
closed down 13.35 points or 0.13%
The dour mood was confirmed by news that telecoms giant WorldCom had filed for protection from its creditors barely a month after admitting to overstating its profits by $3.8bn.

Persistent worry

At the root of the dismal performance is the continuing worry that, after WorldCom, Enron and the like, there are more skeletons in the corporate cupboard.

"It's the same old thing we have been seeing over the last few weeks," said Thomas Garcia, a fund manager at Thornburg Investment Management Co.

"There are still mutual fund redemptions and fear of bad earnings coming out this week."

The fact that the mood is more jittery than anything else was demonstrated by the Dow's gyrations in today's trading.

It opened down about 75 points before leaping to an 80-point gain.

But that could not last, and the afternoon was spent seesawing between a narrow 10-point gain and a 300-point deficit.

European markets were no better, with London's FTSE 100 dropping 200 points to a six-year low.

As investors' trading screens went red, President George W Bush tried to shore up sentiment by reiterating his belief that the US economy was fundamentally sound and that Congressional action to punish corporate wrongdoers would help stem the markets' slide.

"I'm an optimist," he told reporters. "I believe the future is going to be bright."

And he added that he believed the WorldCom problems had already been factored in by traders.

On the bounce

Last week's worldwide stock market falls, the culmination of a two-month slump that has wiped up to one-quarter of the value off the world's top companies, came despite some positive corporate news.

Giants such as Coca-Cola, Ford and IBM all reported solid profits last week.

But traders' attention was focused on news that Johnson & Johnson may be suffering accounting problems at a Puerto Rican plant.

How this crash compares
There have been far worse "bear" markets
Four crashes in 1987 and 1929 saw more than 10% wiped off markets in one day
The Wall Street Crash of 1929 did not see recovery until 1954

"If they're focusing on little bits of bad news, and ignoring big bits of good news, then there's no hope," one New York trader commented.

And terrible results from telecoms company BellSouth reinforced the gloom, hamemring the sector in the wake of the WorldCom announcement.

Appetite for gloom

This week sees yet another swathe of corporate results in the US, including Texas Instruments, AT&T and AOL Time Warner.

But there are fears that investors will continue ignoring positive news, picking up instead on any hints of trouble.

Brokers say the market could now be entering a phase of "capitulation", the level at which investors decide to cut their losses, instead of hanging on in the hope of an upturn.

They point out that the latest bear market is now in its ninth week, while the Dow has broken below its post-11 September trough.

The BBC's Gavin Hewitt reports from New York
"You don't have to travel far from Wall Street to discover what this is doing to ordinary Americans"
The BBC's Jeff Randall in the City of London
"There is abject confusion in the City"


The Markets: 9:29 UK
FTSE 100 5760.40 -151.7
Dow Jones 11380.99 -119.7
Nasdaq 2243.78 -28.9
FTSE delayed by 15 mins, Dow and Nasdaq by 20 mins
Launch marketwatch
View market data
See also:

22 Jul 02 | Business
22 Jul 02 | Business
19 Jul 02 | Business
19 Jul 02 | Business
16 Jul 02 | Business
16 Jul 02 | Business
16 Jul 02 | Business
16 Jul 02 | Business
15 Jul 02 | Business
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |