Byline: Patrice Hill, THE WASHINGTON TIMES
Stocks plummeted yesterday, marking the sixth straight week of declines that have driven the Dow Jones Industrial Average below 10,000 and put other indexes in negative territory for the year.
A host of worries is weighing on the market, chief among them a climb in the price of oil to a near-record high, signs that earnings and economic growth are cooling, and the threat of terrorism in the Middle East and at home as the political conventions approach.
The Dow ended the day down 88 points at 9,962, capping its worst string of weekly losses since October 2002, while the technology-driven Nasdaq Composite Index fell 2 percent to 1,849 and set a new low for the year. The Standard & Poor's 500 Index also is down for the year.
Triggering yesterday's declines were reports of disappointing earnings at Microsoft Corp., a Dow component, and Amazon.com, and a shortfall in sales at Coca-Cola Co., all raising fears that the recent softness in consumer spending continues.
"There's a lot to worry about out there," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "It's going to take a while for these issues to be resolved, and I think we'll be stuck moving sideways to lower until then."
The market has piled up losses despite a spectacular 24 percent increase in earnings at S&P 500 companies in the second quarter, following a 27.5 percent jump in the first quarter, according to Thomson Financial, the securities research and publishing company.
However, the market is looking ahead to a widely predicted slowdown in earnings growth in the second half of the year. Analysts surveyed by Thomson say earnings will rise a more moderate 15 percent in the summer quarter.
"The current cycle is following a traditional pattern," said John Silvia, chief economist with Wachovia Securities. "Consumer spending slows, and the year-over-year profit growth slows. There is still growth, but the momentum" is down.
The slowdown is "normal" in a maturing business cycle as personal incomes and spending settle into growth at a measured but steady pace, he said. "The challenge is to recognize the slowdown while not becoming too pessimistic. …