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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Enron Fallout Weighs on Stocks' Second-Quarter Performance

CHICAGO, Jun 26, 2002 – Chicago-based Morningstar, Inc., a leading investment research firm, today released its second-quarter stocks summary in its special Quarter in Review section on the firm's investment Web site, Morningstar.com.

"The collapse of Enron and the resulting loss of investor confidence continues to take its toll on the markets, and the U.S. economy is still struggling to get on its feet," said Pat Dorsey, director of stock analysis for Morningstar. "Accounting concerns and corporate ethics were hot-button issues this quarter, as business headlines were dominated by the Arthur Andersen trial and other examples of malfeasance." 

Second Quarter 2002 Stock Performance Highlights 
(data through Tuesday, June 25, 2002):

  • All market indexes suffered double-digit losses: For the trailing three months ending June 25, 2002, the Dow Jones Industrial Average fell 11 percent, the S&P 500 fell nearly 14 percent, and the Nasdaq Composite fell 21 percent.     
  • Consumer staples, which includes companies such as Coca-Cola (KO) and Kraft Foods (KFT), was the best-performing of Morningstar's 10 stock sectors, posting a 0.52 percent gain.    
  • Utilities was the second best-performing stock sector with a loss of more than one percent.     
  • Technology remained the worst-performing stock sector, losing nearly 28 percent.     
  • The top-performing industry was title insurance, gaining nearly 29 percent.     
  • Talk America Holdings (TALK) returned the largest gain for the quarter at more than 700 percent, while Peregrine Systems (PRGN), a software company, was the worst-performing stock, down almost 90 percent.

Industry Round-Up
"Consumer staples remains one of the top-performing sectors because these stocks seem like a safe haven in tough economic times," Dorsey added. "There were a few surprise hits this quarter. Auto-related industries, such as repair services and auto retail, did very well, strengthened by such stocks as AutoZone (AZO) and Advance Auto Parts (AAP)." 

Other winners include precious-metals stocks and housing issues. A rally in gold prices caused gold and silver stocks to jump more than eight percent during the past three months, and the surprisingly resilient U.S. housing market helped mortgages climb more than six percent for the quarter.

There were also plenty of negative trends, reflected in the numerous industries that fell this quarter. The advertising downturn showed few signs of abating, causing such industries as online information, entertainment and advertising to suffer double-digit losses. Among the stocks hit hardest were AOL Time Warner (AOL), down 34 percent, Vivendi Universal (V), sliding nearly 46 percent, and Omnicom Group (OMC), falling 47 percent. 

Among the worst-performing industries were communications equipment, down nearly 58 percent and cable/wireless equipment, down more than 33 percent, with wireless giants Qualcomm (QCOM), Nokia (NOK), and Ericsson (ERICY) all dropping more than 30 percent for the trailing three months. 

Computer-related stocks also remained one of the worst-performing industries for the quarter. Computer storage, computer programming, and semiconductors were among the industries to decline more than 20 percent during the past three months, including big drops by such giants as EMC (EMC), Sun Microsystems (SUNW), and Intel (INTC), all losing around 40 percent for the trailing three months.

For the most current data on more than 13,000 funds and 7,000 stocks, as well as in-depth analysis on the quarter's top investing news, go to Morningstar's Quarter In Review section:

http://news.morningstar.com/QtrEnd/CoverQ202.html

To read the "Second Quarter in Stocks," go to:

http://news.morningstar.com/doc/news/0,2,45525,00.html

To read the "Second Quarter in Funds," go to:

http://news.morningstar.com/doc/news/0,2,51183,00.html

Editor's Note: If you are interested in receiving weekly, monthly, and quarterly e-mails on stock and mutual fund data, contact: Annette Larson, Morningstar Media Relations, annette.larson@morningstar.com. Preliminary quarter-end data will be distributed Monday, July 1, 2002.

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