Profit Warnings Weigh Down Dow; Crude Slips
Earnings-related bombs continued to fall on Wall Street on Tuesday, helping to push the market broadly lower.
Eastman Kodak hammered the Dow industrials after the company, one of the 30 Dow stocks, said third-quarter earnings will be below its previous forecasts because of weak sales.
With Kodak down $14.56 to $44.44, the Dow slid 176.83 points, or 1.6%, to 10,631.32, its lowest since Aug. 1.
The Nasdaq composite gave up 52.12 points, or 1.4%, to 3,689.10, its lowest since Aug. 2.
“I’ve been hiding under my desk--we’re trying to dodge all these profit warnings, and they’re coming from everywhere,” said Lynn Yturri, who manages the $800-million One Group Equity Income Fund in Scottsdale, Ariz.
Among companies that have released earnings forecasts for the quarter, 65% have said they will miss analysts’ estimates, according to First Call/Thomson Financial. That compares with 55% by the same point last quarter.
Overall, profit-growth estimates for the quarter are falling rapidly. According to First Call, analysts expect S&P; 500 companies to report 16.5% profit growth, on average, for the quarter compared with a year ago. A week ago the S&P; estimate was for 17.1% growth.
Amid high energy prices, the weak euro currency and the slowing U.S. economy, many companies are finding it tougher to meet sales and earnings targets.
Other companies warning about earnings on Tuesday included retailer Guess, which plunged $9.94 to $9.88, and printer maker Lexmark, down $14.75 to $37.25.
Overall, losers outnumbered winners by 13 to 7 on Nasdaq and by 16 to 13 on the New York Stock Exchange, in heavy trading. Nasdaq volume topped 1.8 billion shares.
In other markets, crude oil was slightly lower, with near-term futures off 7 cents to $31.50 a barrel in New York.
After the market closed, the American Petroleum Institute’s weekly inventory report showed crude oil supplies fell again last week, down 2.2 million barrels.
In currency markets the euro gained ground, ending at 88.3 cents in New York, up from 87.3 cents Monday, on speculation the European Central Bank will again buy euros to support the currency.
Major central banks jumped into the market to buy euros last Friday, signaling they were putting a floor under the beleaguered currency’s value.
“The market is still on pins and needles, wary of follow-up central bank intervention,” said Alex Beuzelin, an analyst at Ruesch International in Washington.
Meanwhile, U.S. Treasury bond yields fell as some money that exited stocks moved into bonds. The five-year T-note slid to 5.88% from 5.94%.
Among Tuesday’s highlights:
* News that Microsoft won a round in its antitrust battle with the government pushed the shares up $1.44 to $62.69. But Intel slid $2.06 to $43.31 despite word that it is no longer facing an antitrust probe.
The tech sector overall was mixed. IBM fell $3.88 to $119.13 and Novellus Systems lost $4.06 to $46.06, but Micron Technology gained $2.88 to $49.63 and Tibco Software gained $1.38 to $85.
* Multinational blue chips falling with Kodak included Procter & Gamble, down $1.38 to $61.75; Merck, down $2 to $70.25; and DuPont, down $1.19 to $38.50.
Also, Media General class A shares slid $4.99 to $44 after the owner of the Tampa Tribune and other newspapers said it will miss analysts’ third-quarter estimates because of declining advertising revenue and higher interest expenses.
* In the retail sector, Dollar General tumbled $2.94 to $17 after a Goldman Sachs analyst downgraded the stock. Retail stocks in general were lower.
* Energy stocks rebounded from recent profit taking. Transocean Sedco rose $1.88 to $57.25, Kerr McGee surged $2.50 to $64.63, Equitable Resources jumped $3.69 to $61.38 and Sunoco rose $1.88 to $27.
* Utility stocks also resurged. The Dow utilities index jumped 2.8%, led by NRG Energy, up $2.50 to $31, and Reliant Energy, up $1.94 to $41.38.
* Home builder Del Webb surged $1.69 to $28.94 after calling a takeover offer from J.F. Shea Co. “deficient.” Other builders’ shares continued to rally in the wake of the offer. Pulte rose 44 cents to $32.81, Ryland jumped $1.06 to $29.31 and Centex gained 81 cents to $30.44.
* Some real estate investment trusts gained after Urban Shopping Centers surged $12.88 to $47.31 in the wake of its agreement to be acquired by Rodamco North America, a Dutch owner of U.S. shopping malls. Rodamco will pay $48 a share for Chicago-based Urban.
Other REIT winners included Rouse, up $1.25 to $25.13, and Simon Property Group, up 69 cents to $23.81.
* Some initial public offerings attracted interest, including network management firm CoSine Communications (ticker symbol: COSN), which jumped from a $23 IPO price to close at $63.06 on Nasdaq.
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Market Roundup: C10, C11
