BellSouth Earnings Warning Takes Its Toll on Wall Street
Another earnings warning--this time, from BellSouth--sent prices lower on Wall Street on Friday. Dejected investors, focusing on high-tech issues, followed a now-familiar pattern and turned against any company expected to deliver disappointing earnings.
But the market was also looking for a reason to buy. Prices surged after a court ruling in the presidential election recount raised hopes of a resolution, but the rally quickly faded when investors realized the deadlock remained.
“This was a very difficult day,” said Bob Dickey, chief technical analyst at Dain Rauscher. “The market was very volatile and ended up chopping back and forth, but basically in the end it didn’t lose too much ground, which is actually a good sign of some stability.”
Indeed, the major indexes ended the week little changed, despite the market’s seeming mood swings and heavy trading.
The Dow Jones industrial average, which closed down 26.16 points, or 0.3%, at 10,629.87 on Friday, finished the week up 26.92 points, or 0.3%.
Broader indicators showed even less change. The technology-dominated Nasdaq composite index slipped 4.69 points, or 0.2%, to 3,027.19 on Friday and closed down 1.80 points for the week despite a 133-point loss on Thursday.
The Standard & Poor’s 500 index fell 4.60 points, or 0.3%, to 1,367.72, for a loss of 1.74 points for the week.
BellSouth’s stock sank $7.13 to $42.13 after the company warned, after the market closed Thursday, that its 2001 earnings would be lower than expected because of the costs of expanding its wireless business.
The warning was the latest in a series of similar predictions by big firms. The cautionary outlooks have been compounded by the Federal Reserve’s announcement this week that it still sees the risk of inflation in the economy, and investors have reacted to the dreary predictions by selling.
Broadcom, the Irvine-based fiber-optics company, tumbled $11.50 to $133, extending its $25 loss from the day before.
Among blue chips, banker J.P. Morgan slipped $3.88 to $144.16 and American Express fell $1.13 to $56.06.
But investors were bullish on some name-brand technology companies. Intel ended the day up $1.50 at $41.50; IBM rose $3.69 to $101.94.
For an eighth session, uncertainty about the presidential election’s outcome plagued the market. Analysts said naming a new president may help ease Wall Street’s volatility and make investors more comfortable about committing to stocks, but it won’t be a panacea for the market’s problems. They said slowing economic and corporate growth, along with European currency woes and oil prices, remain serious obstacles for a year-end rally.
The near-month crude oil contract climbed another 33 cents to $35.45 a barrel Friday, and the euro slid to fresh two-week lows against the dollar.
November historically has brought the start of a rally to Wall Street, but a solid advance remains elusive. Since Oct. 18, the Dow has risen more than 1,000 points only to give back about half of that gain.
“It’s clearly not a ‘Brave New World’ once we clear the elections,” said Bryan Piskorowski, a market analyst with Prudential Securities. “We still have to face the euro and energy, and that’s going to impact all these stocks.”
Advancing issues led decliners 12 to 11 on the New York Stock Exchange, where trading was heavy. On the Nasdaq, about 20 issues fell for every 17 that advanced. More ominously, 247 Nasdaq stocks hit new lows Friday, versus 32 hitting new highs. Trading was active at 1.73 billion shares.
Market Roundup, C4-5
