NEW YORK, Dec. 10 (UPI) -- Investors worried that another interest rate cut by the Federal Reserve won't help improve corporate earnings anytime soon helped send the Dow Jones industrial average Monday back below the 10,000 level, and the Nasdaq composite index below the 2,000 mark.
The blue-chip Dow Jones industrial average, which lost 49.68 points Friday, ended the session down another 128.01 points to 9921.45. The tech-heavy Nasdaq composite index, which fell 33.01 points in the previous session, was down 29.13 points to 1992.13.
The broader New York Stock Exchange composite index was down 8.94 to 578.25, while the Standard & Poor's 500 index was down 18.38 to 1139.93.
The American Stock Exchange composite index was down 4.50 points to 819.22, while the Russell 2000 Index was down 7.03 to 474.18. The broad Wilshire 5000 ended down 161.94 to 10,583.43.
The Treasury market strengthened with the 10-year bond gaining 16/32 to 99 1/4, yielding 5.10 percent and the 30-year bond up 11/32 to 97 3/8, yielding 5.56 percent.
Big Board volume was 1.44 billion shares traded, compared to 1.23 billion shares on Friday.
The sell off comes one day before the Federal Reserve is widely expected to cut short-term interest rates by a quarter percentage point to 1.75 percent. The cut would be the 11th rate reduction by Federal Reserve Chairman Alan Greenspan.
Meanwhile, the closely watched "Blue Chip" economists' survey predicted the nation's economy should pull out of its recession soon, but the recovery may be lackluster initially.
"With surprising swiftness, the focus of discussion about the U.S. economy has shifted from the extreme gloom that prevailed in the month and a half following the Sept. 11 terrorists attacks to rising optimism that signs of an eventual recovery are already beginning to emerge," a summary of the latest poll of economists said.
However, it added, "Whether the newfound optimism is misplaced or simply premature remains an open question."
Economists in the December poll by Blue Economic Indicators, a Kansas City, Mo.-based newsletter, projected that U.S. gross domestic product would contract by 1.3 percent in the current fourth quarter.
While still recessionary, that projection is not as gloomy as the 1.9 percent decline predicted for that quarter in the November Blue Chip poll.
The newsletter noted that consumer spending has held up better than expected so far, portending a milder contraction.
A fourth-quarter GDP drop would mark the second quarter in a row that economic output has shrunk. GDP is expected to move into the plus column in the first period of 2002, but only marginally so, according to the poll.
In the latest poll, which was conducted Dec. 3-4, Blue Chip pegged first-quarter growth at 0.4 percent, a notch lower than the 0.5 percent rise predicted in November.
According to the National Bureau of Economic Research, considered the arbiter of U.S. business cycles, the U.S. economy entered a recession in March, ending a 10-year expansion that was the longest in history.
In other news, the Kansas City Federal Reserve Manufacturing Survey Index dropped sharply to a level of minus 15 points, indicating further economic deterioration in the Tenth Federal Reserve region.
Meanwhile, analysts said stocks drew some support after General Electric said it was on track to meet 2001 targets.
General Electric's Chief Executive Jeffrey Immelt said in an internal memo to employees that the company was on track to meet financial targets in 2001 and to see double-digit earnings growth in 2002 and beyond.
Immelt also said short-cycle businesses in the U.S. have stabilized.
Meanwhile, U.S. Treasury prices were little changed in light trading despite expectations for a rate cut from Federal Reserve policymakers when they meet Tuesday. The 10-year bond rose 1/32 to 98 25/32. Its yield, which moves in the opposite direction of its price, remained at 5.16 percent.
In Europe, stock prices ended lower in moderate trading in London, Frankfurt and Paris, pressured by weakness in technology issues.
The London International Stock Exchange's blue-chip FTSE-100 index lost 74.2 points, or 1.41 percent, to 5,190.5. The German DAX index fell 74.35 points, or 1.43 percent, to 5,124.68 and the French CAC-40 index declined 86.65 points, or 1.87 percent, to 4,556.29.
Analysts said stocks lost ground on weakness in the technology stocks after STMicroelectronics's biggest investors began to sell its stock.
France Telecom and Italian engineering company Finmeccanica said they were selling a 7 percent stake in Europe's biggest chipmaker STMicroelectronics.
Earlier in Asia, prices on the Tokyo Stock Exchange ended sharply lower, pressured by weakness in the banking sector amid renewed concerns their mountain of bad loans may thwart efforts to strengthen capital bases. Japan's blue-chip Nikkei Average of 225 selective issues, which lost 60.39 points Friday, fell 225.88 points, or 2.09 percent, to 10,571.00.
Analysts said investors were reluctant to take active buying positions given the vulnerability of the financial system to corporate bankruptcies, as well as a lack of attractive buys.
Overall, the market came under pressure from weakness in the banking sector as investors were worried that the recent high-profile bankruptcy of builder Aoki Corp. and the bleak economic outlook could add to massive bad loans at the country's biggest lenders.
Losses from the bank sector triggered falls in financials and real estate issues, as many companies in those sectors are heavily in debt, traders noted.
Technology issues and export-related issues, such as automakers, failed to benefit from an official green light from a weakening yen that lead the Japanese currency to slide further against the dollar.
A weaker yen usually means better business for Japanese companies because it lowers prices and thus increases the competitiveness of their exports in overseas markets.
Elsewhere in Asia, prices on the Hong Kong Stock Exchange ended slightly lower ahead of Tuesday's policy making Federal Open Market Committee meeting.
The key Hang Seng Index fell 47.26 points, or 0.40 percent, to 11,784.90 as investors stayed away from bank shares ahead of the Fed's monetary policy meeting.
Hong Kong's monetary policy tends to follow those of the U.S. as the local currency is pegged to the dollar.
Meanwhile, prices on the South Korean Stock Exchange ended sharply lower, knocked down by profit-taking and aggressive selling of blue chips by foreigners. The key Korea Composite Stock Price Index, or Kospi, sank 35.73 points, or 5.07 percent, to 668.77, giving up all their gains from Friday. The decline came after the index had gained 9.4 percent last week.
Participants noted said stock prices were due for some consolidation.
Prices on the Taiwan Stock Exchange ended slightly lower for the first time in 6 trading sessions as investors judged the recent rally was overdone. The key Weighted Index slipped 12.65 points, or 0.24 percent, to 5,321.28.
Last week, the index soared nearly 20 percent as election results led to hopes that President Chen Shui-bian would gain a stronger grip on the island's politics and economy.
Elsewhere in the Pacific region, prices ended slightly lower on the Australian Stock Exchange. The blue-chip All Ordinaries Index eased 11.10 points, or 0.34 percent, to 3,301.60.
