Dell’s Profit Warning Weighs Down Nasdaq
Stocks ended mixed Monday after Dell Computer warned its profit will be hit by a global economic slowdown, kicking off a heavy week for corporate earnings reports on a dour note.
Strength in shares of retailers, insurance companies and biotechnology companies helped cushion the blow. But an element of caution hung over Wall Street.
“This is the blockbuster week where the vast majority of earnings will come out, so people are pausing and are willing to take some profits” from the recent rally, said Joseph Barthel, chief investment strategist at Fahnestock & Co.
This is the busiest week for fourth-quarter earnings, with more than 1,100 companies expected to report.
The technology-laden Nasdaq composite index ended down 12.47 points, or 0.5%, at 2,757.91 on Monday. It was weighed down by weakness in computer and software companies after Dell, the No. 2 personal computer firm, said earnings in its current quarter will be 18 to 19 cents a share, down from a previous estimate of 26 cents. Dell’s quarter ends Feb. 2.
The Dow Jones industrial average finished down 9.35 points, or 0.1%, at 10,578.24, while the broader Standard & Poor’s 500 inched up slightly.
The Dow was pushed down by financial component American Express, which fell $3.63 to $45 after it warned that profit growth this year would be at the low end of expectations due to weak financial markets and a slowing economy.
Dell, whose shares fell to a session low of $23.63, finished off just 13 cents at $25.50. But it did nudge rivals lower on worries the softening global economy also would pressure their profits.
IBM lost $2.69 to $108.56 and Hewlett-Packard skidded $1.25 to $34.50. Compaq Computer fell 68 cents to $19.82, Gateway declined $2.24 to $21.45 and Apple Computer fell 25 cents to $19.25.
“There’s a little bit of caution, and it’s warranted,” said Larry Rice, chief investment officer at Josephthal Lyon & Ross.
Texas Instruments fell $1.75 to $48.56 in regular trading, then dropped to $46.50 in after hours trading, after the company said it will miss first-quarter earnings estimates.
Despite the pall cast by Dell, the market has largely withstood bad news, as it did after other bellwethers issued warnings recently. Although the Dow and Nasdaq indexes lost ground, winners outnumbered losers by narrow margins on Nasdaq and the New York Stock Exchange in moderate trading.
“We are beyond the stage where such announcements are going to shake [the market] to its feet like they did a few months ago,” said Donald Selkin, chief market strategist at Joseph Gunnar & Co.
Among Nasdaq stalwarts, Web-gear giant Cisco Systems rose $1.06 to $41.44 while Microsoft lost 88 cents to $60.13.
Home Depot, up $2.75 at $43.75, and Wal-Mart Stores, up $1.75 at $52.56, provided support to the Dow after Goldman, Sachs & Co. advised clients to buy the stocks on weakness.
Goldman also favored other retailers, including Gap, up $3.25 to $29.25, and Federated Department Stores, up $2.50 to $40.50. The S&P; retail index rose 4.3%.
Besides earnings reports, investors also are waiting for Federal Reserve Chairman Alan Greenspan to address the U.S. Senate Budget Committee on Thursday to see if he will confirm growing expectations for another half-point interest rate cut at next week’s Fed meeting, to perk up the flagging U.S. economy.
The Fed cut its key short-term rate a half point on Jan. 3.
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Reuters and Bloomberg News were used in compiling this report.
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Market Roundup: C13, C14
