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Dow fell 140 more points, but it could have been worse, analysts say

SHARE Dow fell 140 more points, but it could have been worse, analysts say

The U.S. stock markets, which opened Friday in the wake of a bomb scare on the London exchange, fell again as the Dow Jones industrial average ended its worst week since the dawn of World War II.

Investors remain deeply concerned about the U.S. economy, which is coming back to life in a halting fashion after the Sept. 11 terror attacks on the World Trade Center and Pentagon.

This economic threat is underscored by the continued uncertainty of another terrorist attack, particularly on U.S. soil, that would plunge the nation into a second crisis.

Billions of dollars in output have been lost and tens of thousands of people have altered air travel and vacation plans, erasing profits and forcing massive employee layoffs.

Since its close on Sept. 10, the day before the suicide airliner attacks, the Dow has lost 14.3 percent of its value, or 1369.7 points. That's the biggest one-week point decline ever, and the biggest percentage decline since May 1940.

About $1.4 trillion — that's $1,400,000,000,000 — in shareholder wealth has disappeared.

The Dow Jones industrial average fell 140 points Friday for the fifth consecutive daily decline, to close at 8235.81.

The most devastated have been airline and hotel stocks, which have lost about one-third of their value this week. The airline industry, which has announced more than 100,000 layoffs, is desperately seeking a government bailout.

Stocks in auto manufacturers and computer-chip companies have fallen by about 20 percent this week, reflecting the fact businesses will sharply curtail investing in telecommunications networks and other capital projects, and that consumers will stop buying cars and SUVs.

"We are in free fall ... there are a lot of individual stocks that are getting scalped," said Ernie Widmann, president of Widmann Siff & Co., a Bryn Mawr, Pa., money management firm. "The one thing that is good about a free fall is that a catalyst, like a military assault or some good economic statistics, can give it some bounce, and we could get a V-shape recovery.

"Such news jars investors back to reality so they look at prospects on a longer-term basis," Widmann said. "Hopefully that starts in the next week or two ... People are short-term-oriented and as long as they are, they will bring these stocks down."

Throughout the world Friday, stock exchanges reeled. Benchmark indexes in Britain, Germany, Italy and Switzerland slid to their lowest levels since 1997 and were on track for their worst month in 11 years or more.

Despite the Dow's 140-point drop Friday, market watchers said the market staged a comeback of sorts. Early morning futures trading in London indicated the Dow index could fall between 400 and 600 points.

Some confidence in U.S. stocks was restored when Jeff Immelt, General Electric chief executive officer, told analysts the conglomerate would make its profit forecasts for this year and next year.

He said growth in the company's power, financing and medical-imaging units will cover sliding profits or losses in businesses hurt by the terrorist attacks, including insurance and aerospace.

General Electric plans to cut $500 million in costs at its aircraft engine operations by 2002 and eliminate 3,000 positions in four years, the company said. Immelt said he expects engine shipments to drop about 25 percent in 2002.

Money managers said GE's announcement and other developments pointed to a glimmer of hope: stock prices may be near their low point.

"Everything tells me we're close to a bottom, but what I'm worried about is another terrorist attack in the U.S.," said Tim Connors, director of research for value equities at the Delaware Investments. "Things are improving a little bit. Investors are beginning to pay attention to value measures."

The U.S. stock market opened on "hesitancy and concern over what happened on the London stock exchange and the fact that we have no news," said William F. McLaughlin Jr., senior vice president of investments for Salomon Smith Barney in Philadelphia.

He said the 140-point loss "constitutes a dramatic comeback compared to where we were in the morning ... this is a market that is looking for some form of positive catalyst, some concrete development that will get people to think something optimistic will happen."

David Kotok, chief investment officer at the Vineland, N.J., money-management firm Cumberland Advisors, said the London bomb scare produced "raw panic selling, pure panic selling ... decisions made entirely by fear ... we are at a point of maximum negative."

But Kotok said he felt the stock market may be near its bottom for several technical reasons, including the fact that the wealthy Bass family was forced to sell a huge chunk of Disney stock because of a margin call on Thursday. Stock prices are so low that institutions should start buying, he said.

Jeremy Siegel, professor of finance at the Wharton School, said, "We had a little bit of a recovery. I guess ending down 140 points is a victory in these times."

Siegel, who in early 2000 warned that the stock market was wildly overvalued with technology stocks, said the stock market is now undervalued. But, he said, "I cannot say whether we are near a bottom. A wave of pessimism could drive the market lower."