US stocks tumbled, pushing the Standard & Poor's 500 Index below 1,000 for the first time since the aftermath of the Sept. 11 terrorist attacks. Benchmark indexes fell for the fifth straight week.
The eight biggest US companies declined, reflecting a weaker-than-expected rebound in corporate profits, concern over the prospect of more terrorism and what President George W. Bush called an "overhang of distrust" after Enron Corp.'s collapse.
Drug shares led the losses after the Wall Street Journal reported that Merck & Co boosted revenue with accounting methods not used by its rivals. International Business Machines Corp.
slumped after the third Wall Street analyst this week said its earnings will fall short of forecasts.
"There was hope we would start seeing a pickup in second-quarter earnings, and it's just not the case," said Liz Miller, who helps invest US$750 million at Trevor Stewart Burton & Jacobsen Inc. The firm's largest holdings are defense stocks, including Lockheed Martin Corp., which reached a record high today.
The S&P 500 fell 17.15, or 1.7 percent, to 989.14, the lowest since Sept. 21, when the index reached a three-and-a-half-year low. Drugmakers such as Pfizer Inc accounted for about a quarter of the drop.
The Dow Jones Industrial Average lost 177.98, or 1.9 percent, to 9,253.79, led by IBM. The NASDAQ Composite Index shed 23.79, or 1.6 percent, to 1,440.96, also its lowest close since Sept. 21.
For the week, the S&P 500 slipped 1.8 percent, as Best Buy Co cut its profit forecast and Advanced Micro Devices Inc said sales will fall short of estimates.
The index fell 11 percent over the past five weeks and has dropped 14 percent year-to-date. The benchmark's decline this year would be its steepest first-half slump since 1970.
The Dow lost 2.3 percent for the week, bringing its five-week drop to 11 percent. It has declined 7.7 percent this year. The NASDAQ's 4.2 percent loss this week extended its year-to-date drop to 26 percent.
Based on changes in the Wilshire 5000 Total Market Index, the broadest measure of US stocks, the market value of US shares has fallen US$1.52 trillion this year.
The decline in health stocks was triggered by the report on Merck. The bookkeeping concerns added to slowing earnings growth in the industry as patents expire and makers of generic drugs win more customers.
"The whole industry has been under a lot of pressure, and I don't see it abating anytime soon," said Fred Kuehndorf, who helps manage US$2 billion at Ashland Management Inc. "The long-term earnings potential of these companies could be notched down," he said.
Merck declined US$2.22 to US$49.98, a four-year low. The Journal said the second-biggest US drugmaker's Merck-Medco benefits unit books as revenue co-payments made to pharmacies when they fill prescriptions, even though drugstores keep that money. Merck said the system, which has no effect on reported revenue, is appropriate, the paper reported.
Merck's bigger rival, Pfizer, fell US$2.05 to US$34.03. Johnson & Johnson, the largest medical-device maker, shed US$2.04 to US$53.
Ashland sold its stake in Merck late last year and has been adding hospital and managed-health-care shares, such as Tenet Healthcare Corp and WellPoint Health Networks Inc.
IBM fell US$2.83 to US$68.75. Daniel Niles, a Lehman Brothers Inc analyst, cut earnings estimates for the world's biggest computer maker because technology spending is slowing. IBM shares have plunged 43 percent this year, the second-steepest loss in the Dow after AT&T Corp's 46 percent loss.
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