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US Stock Market Fails to Extend Rally - 2002-07-25


The U.S. stock market fell Thursday after a wild trading day on Wall Street. The tech-heavy Nasdaq index dropped amid concerns over a slump in the semiconductor industry and questions about AOL Time Warner's accounting. The downturn follows Wednesday's historic rally on Wall Street.

It was a disappointing day for the U.S. stock market. One day after heavy trading drove blue chips to its biggest rally since after the 1987 crash, all three indexes fell, closing in the red on Thursday.

The Dow Jones industrial average closed at 8,186 points, a nearly 5 point drop of .06 percent. The broader Standard and Poor's 500 index lost nearly 5 points on Thursday, about .5 percent.

But the plunge was the most profound in the technology-heavy Nasdaq composite index, which lost fifty points, about 4 percent.

The technology sector took a hit after Taiwan Semiconductor said although second-quarter profits rose sharply, it expects weaker demand in the third quarter.

Chipmaker Intel, chip equipment maker Applied Material, Microsoft and Cisco Systems all fell on the news Thursday.

Although many analysts have predicted that the two-week slide could indicate that the market had bottomed out, a series of corporate scandals continue to haunt Wall Street, delaying a rebound.

Economist Bruce Steinberg of the investment firm Merrill Lynch says that a loss of faith by investors undermines the continued strength of the U.S. economy.

"The equity market is involved with some other worries, things about accounting, whether the quality of earnings are what they should be and it has basically been ignoring most of the economic data, not only the economic data, but second-quarter earnings are actually pretty good and the market really has not heard that much about them either," explained Mr. Steinberg.

Despite a rally on Wednesday, investors unloaded shares of Citigroup and J.P. Morgan Chase on Thursday. The two financial powerhouses are being probed by the U.S. Congress for their dealings with the now bankrupt energy giant, Enron.

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