Profit Warnings Fuel Stock Fall
Yet another round of profit warnings brought high-tech stocks sharply lower and quashed a blue-chip advance Wednesday. The prospect of another disappointing quarter outweighed investors’ short-lived relief over an end to the presidential election deadlock.
Tech stocks sagged in response to the latest high-tech earnings warning, issued by Compaq Computer after the market closed Tuesday. A drop in retail sales during November added to the market’s skittishness.
“The earnings warnings are getting pretty thick,” said Charles White, portfolio manager at Avatar Associates. “When you’ve got retail sales slumping as much as they have and you’ve got consumers as uneasy as they are, these things start to weigh on the marketplace.”
Blue chips got a slight bump up. But an earnings warning by Whirlpool and weaker-than-expected November retail sales caused the Dow Jones industrials to retreat from an early 120-point advance.
The Dow rose 26.17 points, or 0.2%, to close at 10,794.44.
But the Nasdaq composite index fell 109 points, or 3.7%, to 2,822.77, and the Standard & Poor’s 500 index finished down 11.19 points, or 0.8%, at 1,359.99.
The market had an early surge in response to the U.S. Supreme Court’s decision late Tuesday that gave the presidency to Texas Gov. George W. Bush. Wall Street, which hates uncertainty, no doubt appreciated an end to the stalemate.
But analysts said investors’ chief concern is still that the economy is slowing at a faster-than-desirable pace and that earnings will suffer. That worry eased but wasn’t erased when Federal Reserve Chairman Alan Greenspan indicated late last week that the Fed might be inclined to lower interest rates early next year.
The focus on earnings pushed the election’s resolution into the background Wednesday.
Retailing and auto stocks were mixed after the Commerce Department reported that retail sales fell by a surprising 0.4% in November. Last month’s performance, the weakest since April, was led by the biggest drop in auto sales in more than two years.
General Motors (ticker symbol: GM) rose $1.44 to $53.19, but Wal-Mart Stores (WMT) fell $1.56 to $50.31.
Whirlpool (WHR) tumbled $2.75 to $41.44 after saying Wednesday that fourth-quarter profit would be well below expectations. The company also announced a restructuring plan that includes job cuts around the world.
Compaq (CPQ) lost $2.67, finishing at $18.10. The computer maker was the latest big tech company to warn that slumping sales will result in disappointing fourth-quarter earnings.
Compaq’s warning hurt other computer makers and software companies. Dell Computer (DELL) gave up $1.27, closing at $20.44, and Microsoft (MSFT) fell $1.13 to $57.25.
Claire’s Stores (CLE) slid $2.56 to $16.75 after announcing fourth-quarter earnings will fall short of expectations.
Papa John’s International (PZZA) skidded $4.94 to $21.88. The pizza chain said late Tuesday that fourth-quarter profit will be weak and that next year’s results could miss analysts’ expectations by as much as 20%.
Declining issues led advancers by 7 to 5 on the New York Stock Exchange, where trading was heavy. Losers outnumbered winners by 23 to 16 on Nasdaq, where 2 billion shares changed hands.
Among the day’s highlights:
* The “Bush effect” was much in evidence. Pharmaceutical and tobacco issues made big advances based on the view that their businesses will fare better under Bush.
Drug maker Pfizer (PFE) gained $1.81, trading at $45.81, as the Amex drug index jumped 2.4%.
Food and tobacco maker Philip Morris (MO) rose $1.94 to $40.81.
* One sector that didn’t benefit from the end to the presidential deadlock was gold, which fell $1.70 an ounce to $268.60 Wednesday. The Philadelphia gold and silver index of mining company shares was off 3.8%. Gold prices had crept up in recent days as some investors sought shelter from the ongoing election fallout.
* No matter who is president, the woes for many Internet stocks continue unabated. Shares of Razorfish (RAZF) fell $1.69, or 43%, to $1.75 after the Web-site designer said it expects to post a fourth-quarter loss of 17 cents to 22 cents a share. Wall Street was expecting the company to earn 2 cents a share.
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Market Roundup C8, C9
