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U.S. Stocks Fall for 3rd Day

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NEW YORK — U.S. stocks fell for a third day as evidence mounted that the economic costs of the attack that destroyed the World Trade Center will be larger than anticipated.

General Electric Co., Microsoft Corp. and Exxon Mobil Corp. fell as the Standard & Poor's 500 Index dropped below 1000 for the first time in almost three years. A rally in the last 90 minutes of trading pared two-thirds of the decline in benchmark indexes.

Charles Schwab Corp. sank after the company said profits will drop more than forecast. Boeing Co. slid as it said it will lay off 30,000 people and aircraft deliveries will decline this year.

"Slowly but surely the economic reality will sink in," said Christopher Wolfe, a strategist for J.P. Morgan's private banking unit, which manages $300 billion.

The Nasdaq Composite Index dropped 27.42, or 1.8 percent, to 1527.66, erasing most of a 6.7 percent afternoon plunge. The S&P 500 lost 16.66, or 1.6 percent, to 1016.08, after falling as low as 984.62.

Wolfe said he expects the S&P 500 to fall an additional 5 percent to 10 percent over the next several months as earnings forecasts drop to reflect the attack's impact. He said some J.P. Morgan clients have been shifting to bonds or buying companies with stable earnings growth such as drugmaker Pfizer Inc.

The Nasdaq, which peaked on March 10, 2000, at 5048.62, has declined by 70 percent to its lowest in almost three years. The S&P 500 is off by one third from its high.

The Dow Jones Industrial Average dropped 144.27, or 1.6 percent, to 8759.13, led by Eastman Kodak Co., which declined after saying third-quarter profit will be less than expected.

Almost 2.2 billion shares traded on the New York Stock Exchange, according to preliminary statistics, putting the exchange on track for its second busiest day ever. More than three stocks fell for every one that rose on the Big Board.

"It's an extremely broad-based decline," said Tom Schrader, head of listed trading at Legg Mason Wood Walker in Baltimore. Schrader said that even health-care stocks, which investors often consider "defensive" because their profits remain stable in a slowdown, have declined today.

"There is no place to hide," he said. "All of the classic defensive areas are going down."

U.S. exchanges opened Monday after a four-day halt, the longest since 1933. The Dow has lost 8.8 percent this week, the S&P 500 shed 7 percent and the Nasdaq is down 9.9 percent.

General Electric, the world's largest company, lost $1.24 to $32.61 and is down 17 percent this week. Investors expect the assault to hurt GE's aircraft engine, insurance, airplane leasing and credit card businesses.

GE Chairman Jeffrey Immelt is scheduled to address shareholders and analysts at a meeting Friday.

With many travelers scared to fly after terrorists hijacked four airliners in last week's attack, airlines are likely to curtail their purchases of new planes and equipment, sending aerospace stocks down.

Honeywell International Inc., which makes instruments and control systems for commercial aircraft, dropped $1.93 to $26.58. United Technologies Corp., whose Pratt & Whitney airplane engines compete with GE, fell $1.42 to $47.65.

Boeing will slash as many as 30,000 jobs by the end of next year because of the disruptions to air travel, the company said yesterday after exchanges closed. The largest aircraft maker also said it expects to deliver about 500 planes this year, down from an earlier estimate of 538.

Boeing shares declined 53 cents to $32.61 after falling 24 percent Monday and Tuesday.

Exxon Mobil lost $1.07 to $38.41 as analysts said demand for jet fuel and other oil products has fallen.

Crude oil prices are now down almost 3 percent since last Tuesday's attack. Saudi Arabia has said the Organization of Petroleum Exporting Countries will keep oil in its target range of $22 to $28 a barrel, allaying fears the attack or a U.S. retaliation might disrupt supplies.

Royal Dutch/Shell Group's U.S. shares, which are in the S&P 500, fell $2.63 to $48.05. The company cut its target for annual growth in oil and gas output to 3 percent.

Even as stocks fell, some of the biggest investors say they're buying.

"I don't mean to be coy, but you make money when you buy low and sell high," said Christopher Ailman, chief investment officer of the roughly $95 billion California State Teachers' Retirement System. "Emotionally you don't want to do that, but from the standpoint of managing a portfolio, you have to."

The California Public Employees' Retirement System and the New York State Common Retirement Fund, which along with the California teachers fund are the three biggest U.S. public pension funds, also say they're buying stocks.

Among technology stocks, Microsoft fell 45 cents to $53.87, Intel Corp. dropped $1.19 to $22.28, and Dell Computer Corp. lost 71 cents to $19.08.

Charles Schwab, the biggest discount stock broker, fell 56 cents to $9.45. Schwab said profit in the quarter ending Sept. 30 will be less than expected as financial firms begin to tally the costs of the trading halt after terrorists destroyed the World Trade Center in the heart of Manhattan's financial district.

Other brokers also declined. Merrill Lynch & Co. fell $1.31 to $38.50, Lehman Brothers Holdings Inc. slid $1.06 to $51.33, and Ameritrade Holding Corp. lost 42 cents to $4.05.

Schwab has fallen 20 percent since trading resumed, Merrill 18 percent, Lehman 17 percent and Ameritrade 21 percent.

Drug stocks, one of the few groups that gained on Monday, fell yesterday and today, giving the Amex Pharmaceutical Index a 2 percent decline since the attack. Pfizer, the biggest drugmaker, fell 78 cents today to $37.02. Johnson & Johnson lost 96 cents to $53.54, Eli Lilly & Co. slid $2.46 to $75.50, and American Home Products Corp. declined $1.20 to $56.80.

Stocks reached their lows for the day after the Federal Reserve said its latest regional survey showed consumer spending was flat in August and September even before the terrorist assault.

Investors and economists have said the impact of the attack on consumers will ripple through the economy. Already, airlines are shedding workers as people cancel travel plans because of safety concerns raised by the terrorists' hijacking of four planes. The firings, in turn, may cause Americans to slow their spending, economists say.

"Any kind of spending that is discretionary is on hold," said Peter Canelo, a U.S. investment strategist at Morgan Stanley Dean Witter & Co.

Eastman Kodak Co. fell $2.22 to $37.61. The largest photography company also said it will cut jobs, citing an increased likelihood of economic contraction worldwide. Third-quarter profits will be less than expected as sales in August fell 7 percent from a year ago, Kodak said.

Amid today's plunge, traders at securities firms and on the NYSE floor complained that phone service was frequently interrupted at the Big Board. Making matters worse was the "Nimda" computer virus, prompting securities firms to telephone floor brokers with orders rather than sending requests electronically.

"Because of the virus, more phone calls are being made on an already weakened telecommunications infrastructure," said Art Hogan, chief market analyst at Jefferies & Co.

An NYSE spokesman declined to comment, and a Verizon Communications Inc. spokesman said he couldn't immediately comment.

Adobe Systems Inc. fell $4 to $26.10. The graphic-design software maker reduced its fourth-quarter revenue forecast to reflect declining sales in Japan. The company also reported a decline in its fiscal third-quarter profit as sales fell.

ImClone Systems Inc., which is developing cancer medicines, jumped $6.59 to $56.60 after the Wall Street Journal reported that Bristol-Myers Squibb Co. is offering to buy a 20 percent stake in the company for $70 a share. The newspaper cited people familiar with the matter.

Genesis Microchip Inc. rose $5.45 to $25.15. The maker of imaging semiconductors said it expects revenue to rise 40 percent in its fiscal second quarter, up from a previous forecast of 16 percent to 20 percent growth.

Phone companies were among the biggest gainers in the S&P 500 on expectations their profits will remain steady in a slowing economy. Verizon Communications Inc. rose $2.20 to $53.90 and Qwest Communications International Inc. gained 50 cents to $20.15.

Cell phone companies rose after a report in the Wall Street Journal said cell phone sales have surged since the disaster, which sowed panic in New York and Washington. Analysts predicted the disaster would spur a rise in the number of people carrying cell phones.

AT&T Wireless Services Inc. rose $1.02 to $15 and Nextel Communications Inc. rose 59 cents to $9.90.

The Russell 2000 Index of smaller stocks fell 8.46, or 2.1 percent, to 403.20. The Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, declined 158.71, or 1.7 percent, to 9357.60.