Earnings Fears Pummel Dell’s Stock, Rattling Market
U.S. stocks ended a rocky week with a sharp tumble Friday, as leading tech stocks plunged and as Treasury bond yields hit their highest levels since August.
Also, a surprise cut in Japanese interest rates--already the world’s lowest--fanned fears that the Japanese economy is getting worse instead of better.
On Wall Street the Nasdaq composite index slumped 83.66 points, or 3.5%, to 2,321.89, led lower by a dive in Dell Computer’s shares after some analysts voiced concerns about the company’s earnings report due Tuesday.
The Dow Jones industrial average also sank, though its loss was more modest: The Dow fell 88.57 points, or nearly 1%, to 9,274.89.
Analysts noted that it was only Thursday that the Nasdaq index recorded its biggest one-day point gain ever, rising 96.05 points, or 4.2%. On Tuesday the index had plunged 94.13 points.
“This is an on-again, off-again market,” said Hugh Johnson, chief investment officer at First Albany. “The emotional swings in the market are extraordinary,” he said.
For the week the Nasdaq index lost 2.2%, the Standard & Poor’s 500 index fell 0.8% and the Dow eased 0.3%.
After surging from October to mid-January the stock market has stalled out in recent weeks, which analysts say in part reflects rising long-term interest rates. Bond traders are pushing yields higher in response to the surprising strength of the U.S. economy.
On Friday bond yields rocketed in a shortened session ahead of the long holiday weekend. The 30-year Treasury bond yield jumped from 5.36% on Thursday to 5.42% on Friday--the highest since August.
Traders said the jump may have been exaggerated by the relative few players in the market on Friday. Also, in the wake of the Treasury’s sale of $35 billion in new bonds this week, a supply glut developed, traders said.
Japan’s rate cut may have hurt the U.S. bond market in a roundabout way, analysts said: The move is aimed at bringing Japanese bond yields down. But at the same time, because the Bank of Japan declined to increase its direct purchases of government bonds, some analysts said the prospects for heavy government debt issuance this year could keep Japanese bond yields relatively high.
That, in turn, could lead more Japanese investors to favor domestic bonds rather than U.S. bonds.
Concern that the Japanese economy isn’t reviving also may be weighing on stock investors, analysts said. There were more signs of weakness in the global economy this week, as a key commodity price index fell to a new 21-year low by Friday.
On the New York Stock Exchange losers swamped winners by a 22 to 8 margin on Friday.
Still, some analysts warned against reading too much into either the bond or stock market moves on Friday, with trading relatively subdued ahead of the holiday.
There was no apparent response to President Clinton’s acquittal by the Senate.
Among Friday’s highlights:
* Tech stocks sliding sharply included IBM, down $5.75 to $172.75; Microsoft, off $5 to $157.75; and Oracle, down $2.88 to $56.69.
* Internet shares were mostly lower, with Yahoo down $7.50 to $151 and Amazon.com down $5.38 to $104.50.
* USA Talks.com, which plans to offer unlimited long-distance telephone service over the Internet for a flat fee, tumbled $12.13 to $1 when it resumed trading after a two-week halt by U.S. regulators. The U.S. Securities and Exchange Commission suspended trading of the San Diego-based company’s shares Jan. 29 because of questions “about the accuracy and adequacy of public information on USA Talks.com.”
* The prospect of higher interest rates kept the banking and financial sectors mostly lower. Chase Manhattan fell $2.06 to $74.06, BankAmerica dropped $2.06 to $62.88 and Bank One lost $1.75 to $49.06.
Brokerage stocks also sank. Merrill Lynch fell $2.56 to $69.13, Morgan Stanley dropped $3.63 to $88.50, Charles Schwab lost $4.31 to $62.69 and Ameritrade sank $8.19 to $90.31.
* Wal-Mart Stores fell $1.44 to $84.38 after Women’s Wear Daily reported, without citing sources, that the world’s biggest retailer had approached Germany’s Metro, the largest European retailer, to discuss an acquisition of all or part of the company.
* Two tech-related initial public offerings posted big gains on their first trading day. Bottomline Technologies rose $7.50 to $20.50 and Onyx Software jumped $10.56 to $23.56.
* J.D. Edwards fell $3.88 to $15. The applications software company said it expects earnings of 2 cents to 4 cents a share for the first quarter ended Jan. 31.
Market Roundup, C4
