Thursday October 12 5:04 PM ET Stocks Plunge to Year-Lows

By Haitham Haddadin

NEW YORK (Reuters) - Stocks plunged to year lows on Thursday as a bombshell earnings warning from retailer Home Depot Inc. and escalating Middle East violence spooked an already jittery Wall Street.

``This market is not in a strong enough state to handle shocks from bad news,'' said Ed Peters, chief investment strategist and director of asset allocation at PanAgora Asset Management Inc.

The Dow Jones industrial average (^DJI - news), a gauge of 30 leading companies, fell a whopping 379.21 points, or 3.64 percent, to end at 10,034.58 -- its fifth-largest point slide ever and its lowest close since March 14, 2000. Three stocks fell for every one that rose on the New York Stock Exchange.

The battered shares of Home Depot (NYSE:HD - news) and the Wall Street house J.P. Morgan & Co. Inc. (NYSE:JPM - news) and computer maker International Business Machines (NYSE:IBM - news) accounted for more than half the Dow's drop.

The technology-laced Nasdaq Composite Index (^IXIC - news) finished at 3,074.68, its lowest close since Nov. 4, 1999. The Nasdaq fell 93.81 points on Thursday for a loss of 2.96 percent. The broader Standard & Poor's 500 Index (^SPX - news) slumped 34.81 points, or 2.55 percent, at 1,329.78, in its lowest close to date this year.

Wall Street has been swamped by fears that high oil prices, a slowing U.S. economy and a weak European single currency would depress corporate America's earnings.

In the latest shock to jittery investors, oil prices bolted back to near-decade highs amid panic buying sparked by fears of disruptions to the flow of crude oil from the oil-rich Middle East.

U.S. crude oil rose as high as $37 a barrel, a jump of $3.75, on news of the assault on U.S. Navy destroyer USS Cole in Yemen, which killed at least five U.S. sailors. There was also more Israel-Palestinian violence.

``Any time the market feels there is an incident in the Middle East, people get nervous about their questionable stocks and turn them into cash,'' Lee Korins, president of the Security Traders Association, told Reuters at an industry conference in Florida.

The profound weakness in blue chips also followed a warning from No. 1 home improvement retailer Home Depot that its future profits would fall short of forecasts. That aggravated fears of softer corporate growth that have pounded Wall Street almost daily since the end of August.

The Dow got dangerously close to breaching the psychologically important 10,000 level, which it has not sunk below since mid-March.

Meanwhile, the tech-packed Nasdaq index had jerked in and out of positive territory, but ended down amid a big drop in Internet-related issues, semiconductors, software and telecommunications companies.

Among Nasdaq's biggest names, Cisco Systems Inc. (NasdaqNM:CSCO - news), the world's biggest maker of computer networking equipment, lost $1-3/8 to $49-13/16, Internet infrastructure company Juniper Networks (NasdaqNM:JNPR - news) lost $6-25/64 to $199-39/64 and Web giant Yahoo! Inc. (NasdaqNM:YHOO - news) was down $8-3/4 at $56-5/8 after disappointing investors with lower advertising on its site.

``The market is nervous and the sentiment is sour. The Middle East tension and the higher energy prices helped push lower a market that was already falling,'' said Alan Ackerman, senior vice president and market strategist at Fahnestock & Co.

``The mood of the market is tied to the number of corporate earnings and revenue disappointments,'' Ackerman said.

Big companies ranging from Intel Corp. (NasdaqNM:INTC - news) to McDonald's Corp. (NYSE:MCD - news) and more recently telecom equipment firms Lucent Technologies (NYSE:LU - news) and Motorola Inc (NYSE:MOT - news) have also warned their financial results will miss estimates.

Home Depot closed down $14-1/16 at $34-7/8, hitting its lowest point since January 1999. That put the heat on the shares of other leading retailers like Wal-Mart Stores (NYSE:WMT - news), which dropped $1-3/16 to $44-1/8.

J.P. Morgan fell $10-13/16 to $136, leading the fall in the financial sector on jitters that higher interest rates and a plummeting stock market would cut into the Wall Street firm's profits.

The market was also gearing up for Friday's Producer Price Index (PPI) for September -- a key gauge of inflation at the wholesale level -- due before the opening. Economists are forecasting an average increase of 0.5 percent in the PPI versus the 0.2 percent decline seen in August. Excluding energy and food prices, the core PPI is seen posting the same 0.1 percent increase as in August. Also due Friday are retail sales figures for last month.

The Philadelphia Stock Exchange semiconductor index (^SOXX - news) lost 2.46 percent, while among the other sectoral indexes, the Nasdaq Internet index (^IIX - news) was off 4.77 percent, reflecting the weakness in the Web-related shares. The Nasdaq telecom index (^IXUT - news) shed 4.57 percent.

But a bright spot was fiber optics maker Corning Inc. (NYSE:GLW - news), which rose $1-1/4 to $84-1/4 after saying its earnings will exceed estimates. But the selling pressure did not spare communications chip maker Applied Micro Circuits Corp. (NasdaqNM:AMCC - news), which shed its early gain of about $3, after posting better-than-anticipated earnings and setting a stock split. It closed down $3-47/64 at $164. S

-- Carl Jenkins (Somewherepress@aol.com), October 12, 2000

Answers

Juniper reports more than double its expected earnings and its stock drops $6. Amazing.

-- Wellesley (wellesley@freport.net), October 12, 2000.