Summer a precursor of what's to come for investors

NEW YORK -- The summer of 2001 will likely be a bitter memory for investors who watched their already battered stock portfolios sink yet again as hopes of a business turnaround evaporated.

Unfortunately, the market's plunge this past week, including a 503-point drop in the Dow Jones industrials over four days, suggests an increasingly bleak prognosis for September and perhaps beyond.

"I think there's less optimism now among investors than there was earlier this summer," said Matt Brown, head of equity management at Wilmington Trust. "Everyone has been hoping that this week will be the week it gets better, and if not then, the next week, but it's not happening."

Indeed, this past week's selling was triggered by a spate of discouraging economic and corporate news.

Two economic reports -- one Tuesday from the Conference Board, the other Thursday from the Commerce Department -- suggested consumer confidence and spending, which accounts for two-thirds of the economy, are weakening. Another report Wednesday, also from the Commerce Department, showed economic growth during the second quarter at the most anemic level in eight years.

Meanwhile, Sun Microsystems and Advanced Micro Devices issued revenue warnings for the current quarter, citing softening demand for their products. And Gateway and Corning announced significant job cuts because of sluggish business.

The result: By Thursday, the Dow and Nasdaq composite index had recorded their lowest closes since April 9. The Dow's four-day slide sliced 4.8 percent from its value, while the Nasdaq tumbled 125 points or 6.5 percent.

The selling eased Friday, partly on an expected rebound, but also because of a government report showing orders to U.S. factories inched up in July.

Still, the respite stopped short of a rally. Analysts blamed low volume ahead of the Labor Day holiday and also investors' growing exasperation.

After months of watching rallies fizzle, many investors have stopped buying in a market that has so far defied prediction. Even technology stocks, responsible for much of the bull market of the late 1990s, have lost their appeal.

"I think people don't feel any pressure to do anything now, to buy any stocks," said Brown, the Wilmington Trust adviser. "They realize that in time the market will turn and will probably turn abruptly upward. But the question is, will it be next week or the end of the year?"