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. Last Updated: 07/27/2016

Battered Stocks Hit 5-Year Lows

NEW YORK -- The U.S. stock market fell to its lowest close in more than five years Wednesday after bleak comments and forecasts from Wall Street analysts on household names such as General Electric Co. and Ford Motor Co. fanned fears about corporate profits.

"We are seeing some of the gap between reality and expectations closing," said Richard Babson, chairman of Babson-United, which manages money for wealthy individuals. "There were these hopes for a fantastic rebound ... but it turns out it's not that fantastic. People are talking about 2003."

Nervousness about disappointing earnings has prompted investors to sell stocks, extending the market's slump and bringing about the deepest bear market since 1937 to 1938, according to data from Banc One Investments Advisors. The Standard & Poor's 500 index has lost almost 50 percent from its record close in March 2000.

"Overall, the trend is down because of the doubts about the earnings prospects for many companies," said Kevin Logan, senior market economist for Dresdner Kleinwort Wasserstein. "Are they going to be able to grow earnings at a level to appease investors? The answer is 'no."'

Financial stocks took a body blow after Moody's Investors Service cut J.P. Morgan Chase & Co.'s long-term debt ratings. This affected about $42 billion of debt and reflected concern over the banking giant's business outlook.

The blue-chip Dow Jones industrial average sank 215.22 points, or 2.87 percent, to 7,286.27, according to the latest available data. The Dow closed at lows not seen since October 1997. The Dow is down more than 37 percent from its January 2000 high.

The broad Standard & Poor's 500 Index slid 21.79 points, or 2.73 percent, to 776.76, closing at its lowest level since the spring of 1997. The Nasdaq Composite slipped 15.10 points, or 1.34 percent, to 1,114.11, carving out new six-year closing lows.

Market breadth was strongly negative, with about seven stocks falling for every one that rose on the New York Stock Exchange and five stocks declining for every two that rose on the Nasdaq.

Shares of major tech companies such as the recently battered Cisco Systems Inc. rallied and helped keep a floor under the tech-laden index. Cisco shares, which had fallen for the previous five consecutive trading sessions, bounced higher on Wednesday, gaining 63 cents, or 7.3 percent, to $9.23 as bargain hunters came out in force, Merrill Lynch analyst Sam Wilson said.

The Dow average reflected more damage after Moody's Investors Service cut J.P. Morgan's long-term debt ratings. J.P. Morgan, another Dow stock, lost about 7 percent, or $1.15, to $15.45. Earlier in the day, J.P. Morgan hit a new multiyear low of $15.30. The Moody's downgrade could make it more costly for J.P. Morgan, the No. 2 U.S. banking company, to borrow as it tries to cut costs.

But the loan losses mount. The bank is preparing to cut thousands of jobs, people familiar with the companies said, as underwriting and trading revenue decline.

Some said worries about the long-term costs of the West Coast lockout also hurt stocks.