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Anthrax Scare Drives US Stock Prices Down - 2001-10-17

U.S. stock prices drifted lower on Wall Street Wednesday, as word came out of Washington that congressional offices were being screened for the potentially deadly anthrax bacteria.

The Dow Jones Industrial Average fell 151 points, 1.6 percent, to 9,233. The broader Standard & Poor's 500 index lost 20 points, almost two percent, while the tech-weighted Nasdaq composite dropped almost 4.5 percent.

Besides the widening anthrax scare, analysts say investors were put off by a cautious economic outlook from Federal Reserve chief Alan Greenspan. Mr. Greenspan warned of a drop in productivity levels following the September 11 terrorist attacks, saying the country has sustained an economic shock.

Veteran market watcher Art Cashin says both events prompted selling. "Mr. Greenspan didn't bring very much to the party, and Congress announced it was considering shutting down," he said. "Now if you're asking the public to go back to life as normal, but if you want to call Congress you have to leave the message on voice-mail, that's not a big boost to public confidence."

As investors face the biggest corporate profit decline in a decade, two Dow components reported sharply lower earnings. Computer giant IBM came in 19 percent lower than year-ago levels. Computer chip maker Intel reported a 77 percent drop in quarterly profits.

In other news, Merrill Lynch, the largest U.S. stock broker, reportedly may cut 10,000 jobs, 15 percent of the total, as the company considers cutting back or pulling out of Japan, Canada, Australia and India.

Merrill has already announced 3800 job cuts this year.

On the economic front, housing starts, which means the beginning of construction on new homes, rose a surprising 1.7 percent in September. Economists had predicted a decline, mostly because of the uncertainty that followed the September 11 attacks.

But the news on housing is mixed. Another report shows applications for building permits, an indication of business confidence at construction firms, fell three percent to its lowest level in four years.

The U.S. housing market has been relatively unscathed during the economic downturn. Analysts watch the housing numbers very carefully for any nuance of change. Historically, this sector has fallen sharply during the early stage of a recession.