Wall Street: Thursday close

GATHERING gloom over the prospects for a profit recovery sent the Dow plunging below 8000 for the first time since July. The benchmark index slid another 230.06 points or 2.8% to 7942.39, and the Nasdaq retreated 35.68 points or 2.9% to 1216.45.

Computer services became the latest sector to be hammered after EDS, second only to IBM in its field, said slow spending on information technology had forced it to cut its outlook. EDS shares plunged $19.26 or 53% to $17.20. IBM slid $4.72 or 6.8% to $64.80 and Computer Sciences dived $5.66 or 16% to $29.50 as analysts cautioned that they might be hit by the same factors afflicting EDS.

An index measuring shares of companies offered computer services has lost almost half its value this year. 'The environment is deteriorating faster than anyone expected,' said Steve Milunovich, an analyst at Merrill Lynch.

The EDS warning weighed on the tech sector with Microsoft off 55 cents or 1.2% to $47.20 and Hewlett-Packard down 54 cents or 4% to $12.85. Software maker Oracle, which flagged lower earnings earlier this week, gave up another 21 cents or 2.5% to $8.11.

Downbeat numbers on housing starts and claims for jobless benefits fed into fears that the economy could be headed back towards recession - the 'double dip' economists have been debating for months. A series of companies warning that business was deteriorating has played into the sour mood.

'Investors are worried about a double-dip possibility,' said Charles Payne, chief executive and chief analyst with investment firm Wall Street Strategies. 'The two reports this morning on jobs and housing disappointed. In addition, concerns about corporate earnings and Iraq are a drag on the markets.'

Morgan Stanley joined the list of financial services firms to report sliding profits. Its shares were marked down $4.20 or 11% to $33.90. JP MorganChase, which warned earlier in the week, sagged another 57 cents or 2.8% to $19.87.

Citigroup shed $1.46 or 5% to $27.65 after it agreed to pay $240m (£160m) to settle charges by the Federal Trade Commission that it had engaged in predatory practices on high-interest consumer loans.

HealthSouth, one of the biggest US hospital and healthcare companies, dived $1.11 or 27% to $3.05 as it reported that the Securities and Exchange Commission was looking into the timing of the release of public information. The founder of the company sold much of his stake just prior to the release of negative news.

Negative words on Coca-Cola from UBS Warburg sent its shares falling $1.63 or 3.3% to $47.67. Rival PepsiCo came off 90 cents or 2.4% to $37.15.

Industrials were in the losing column again as investors reassessed the chances of an early recovery in demand. Aluminium maker Alcoa lost 81 cents or 4% to $20.12. Heavy equipment maker Caterpillar fell $1.22 or 3% to $37.79.