Sep 13, 2002 3 min read

By Hope Yen AP Business Writer

NEW YORK (AP) – Wall Street fell sharply Thursday, pressured by two disappointing economic reports and a strong speech by President Bush to the United Nations demanding action against Iraq. The Dow Jones industrials dropped more than 200 points.

Federal Reserve chairman Alan Greenspan’s comments that “depressing effects” remain in the economy following the terror attacks also upset investors and led to sharp losses for the market.

“The news economic-wise is not great and with the Iraq situation, there’s a lot of uncertainty as well,” said Scott Wren, equity strategist for A.G. Edwards & Sons.

The Dow fell 201.76, or 2.4 percent, to close at 8,379.41, after declining 0.3 percent in an abbreviated session Wednesday to mark the Sept. 11 anniversary.

The broader market also finished lower. The Nasdaq composite index declined 35.80, or 2.7 percent, to 1,279.65, having fallen 0.4 percent Wednesday. The Standard & Poor’s 500 index fell 22.55, or 2.5 percent, to 886.90, following a drop of 0.1 percent.

Bush made his case for action against Iraq amid skepticism from world allies, saying the U.N. must force Saddam Hussein to destroy his weapons of mass destruction.

“We cannot stand by and do nothing while dangers gather,” Bush told the U.N. General Assembly. “We must stand up for our security and for the permanent rights and hopes of mankind.”

The bold speech reinforced investors’ concerns about a possible war with Iraq, which comes as the economy struggles to recover from the recession and the effects of the terror attacks. Earlier, Greenspan told Congress the attacks and stock losses are having a lingering impact on growth.

“To date, the economy appears to have withstood this set of blows well, although the depressing effects still linger,” Greenspan said.

Meanwhile, investors were unimpressed by economic reports on jobless claims and the trade deficit.

The Labor Department reported Thursday that new claims for unemployment benefits rose by 19,000 to 426,000, the highest level since April 20.

In a second report, the Commerce Department said the current account deficit, the broadest measure of trade, surged in the second quarter to a record $130 billion. Analysts were expecting a smaller deficit of $126 billion.

Analysts said the economy will be investors’ main focus in the coming weeks, such as companies’ earnings warnings due out later this month, now that the Sept. 11 anniversary has passed.

“The question is what earnings are going to look like given the somewhat more negative tone from the economic news we’ve seen,” said Jack Caffrey, equities strategist for J.P. Morgan.

Bearish brokerage reports pressured shares of several companies. McDonald’s fell 99 cents to $20.35 after Goldman Sachs noted high financial uncertainties at the fast-food giant.

Chip makers declined after Lehman Brothers cut its 2002 growth forecasts for the sector. Philips Electronics, which also cut its third-quarter sales outlook, dropped $1.45 to $17. Intel fell 88 cents to $15.74.

Among gainers, Steel Dynamics rose $2.20 to $14.78 after raising its third-quarter earnings outlook.

Declining issues outnumbered advancers 3 to 1 on the New York Stock Exchange. Volume was light.

The Russell 2000 index, which tracks smaller company stocks, fell 7.10, or 1.8 percent, to 386.27.

Overseas, Japan’s Nikkei stock average finished higher 0.2 percent. In Europe, France’s CAC-40 fell 4.6 percent, Britain’s FTSE 100 declined 3 percent, and Germany’s DAX index dropped 4.5 percent.

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