Stocks Hit by Microsoft Downgrade, Retail Woes
Stocks fell Thursday after major retailers warned of softer profits and the nation’s largest brokerage soured on Microsoft because of a slump in personal computer sales.
Investors also were still fretting over Tuesday’s warning by computer networking giant Cisco Systems of slower earnings growth. An early rally in tech shares fizzled in the afternoon, and the Nasdaq market carved out its lowest close in a month.
“The market is having a hard time generating a feel for which way to move,” said Charles Lemonides, chief investment officer at M&R; Capital Management. “Optimists can say the glass is half full and the market has found footing. On the flip side, there is little growth in underlying economic activity.”
The tech-laden Nasdaq composite index fell 45.76 points, or 1.8%, to 2,562.06, its lowest close since Jan. 10. That narrows the Nasdaq’s gain for the year to just 3.7%.
The blue-chip Dow Jones industrial average slipped 66.17 points, or 0.6%, to 10,880.55, falling for the third session in a row and pulled lower by retailers like Wal-Mart Stores, which lost $2.36 to $52.30. The broader Standard & Poor’s 500 index shed 8.36 points, or 0.6%, to 1,332.53.
Volume was active on the New York Stock Exchange, where losers topped winners by a 17-14 margin. On Nasdaq, where 1.8 billion shares changed hands, losers outpaced winners 21 to 17.
Microsoft, down $2.44 at $62.25, weighed on all the major indexes. The leading software company was slapped by an investment rating downgrade from Merrill Lynch, which worried about the maturing personal computer market.
Receipts for January showed U.S. retailers posting same-store sales mostly in line with or just above expectations, but many warned they expect margins to be squeezed because of deep markdowns to make room for spring merchandise.
Retailer Home Depot, like Wal-Mart a Dow stock, shed $1.79 to $43.99. The S&P; retail index tumbled 3.8%, reflecting weakness in other retailers.
No. 1 U.S. apparel retailer Gap lost $2.95 to close at $26.61 after its same-store sales fell 12% against an expected drop of 4% to 7%.
Another warning came from women’s apparel retailer AnnTaylor Stores, which fell $1.31 to $26.39.
The negative vibes around Microsoft hit shares of peers, including Oracle, down 56 cents to $27.13, and Adobe Systems, off $4.38 to $35.94. The S&P; computer software index fell 3%.
Cisco, the most active issue on Nasdaq, lost $1.06 to $30, still suffering after a hefty drop Wednesday. The Web gear giant missed estimates for the first time in more than six years and warned that a slowdown may continue for at least the next two quarters.
“You need some good news to keep this market going up; otherwise, you get this gradual erosion. No news in this case is not good news,” said Milton Ezrati, senior economic strategist at Lord Abbett & Co.
“So in the absence of some positive news, whether from policy or some economic statistics, the market begins to reassess its earnings expectations and realize there is going to be a downward adjustment.”
Indeed, the latest economic data gave investors little to cheer about and generally confirmed the slowdown in the economy. The government reported weekly jobless claims rose to 361,000 in the week ended Feb. 3, exceeding an expected 348,000, as well as the previous week’s 346,000.
A jump in oil prices fanned Wall Street’s fears that higher energy prices will nip at Corporate America’s earnings. Record January oil consumption and new violence in the Middle East have put oil on a rising trend. Crude futures climbed 32 cents a barrel to $31.59 in New York trading Thursday, and have risen more than 10% since the end of January.
Among bright spots, Electronic Data Systems jumped $5.61 to $62.51 after the computer services provider posted a 15% gain in earnings per share.
WorldCom, the No. 2 U.S. long-distance telephone company, ticked up 19 cents to $20.31. It posted softer profits as weakness in the long-distance business offset strong growth in data, Internet and international services. But its earnings matched lowered expectations.
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Market Roundup, C7, C8
