Earnings Warnings Take Toll on Market
Investors returned from the holiday to a new barrage of corporate earnings warnings Thursday, raising fears that the market isn’t prepared for just how bad second-quarter results may look.
Stocks fell across the board in light trading on the heels of warnings from such companies as Federated Department Stores and British telecom giant Marconi.
After trading ended new warnings from technology leaders deepened the gloom.
The Dow Jones industrial average closed down 91.25 points, or 0.9%, to 10,479.86.
The Nasdaq composite index slid 60.69 points, or 2.8%, to 2,080.11.
Losers swamped winners by 23 to 13 on Nasdaq and by 17 to 14 on the New York Stock Exchange.
The latest profit warnings added to the market’s dread over second-quarter reports that will begin to flow starting next week.
“No one is in a hurry to buy. Earnings warnings continue to surface at a fast and furious pace,” said Alan Ackerman, executive vice president of Fahnestock & Co.
The technology and telecommunications sectors came under pressure Thursday from Marconi, which announced it was halving its earnings forecasts for 2001, and will cut 4,000 jobs.
Marconi shares on Nasdaq plunged $3.68 to $3.35, a 52% drop.
Though some analysts said the news shouldn’t have surprised anyone, given the dire straits of the telecom sector, many other stocks in the sector slid Thursday.
Alcatel lost $3.54 to $17.46, JDS Uniphase declined $1.06 to $11.61 and Nokia slid $1.85 to $20.35.
“Who could be surprised with a telecom provider announcing they are not going to meet expectations? You would have to have your head in the sand if you thought we were out of the woods there,” said Jon Brorson, head of equities at Northern Trust in Chicago.
In the retail sector, Federated’s shares dropped $2.37 to $38.01 after its warning, and most other major retail shares also tumbled.
May Department Stores fell $1.34 to $32.11, Kohl’s dropped $2.46 to $60.24 and Sears was off $1.21 to $41.71.
Since late May investors have heard warnings from more than 600 companies, many of which reduced already lowered forecasts, according to Thomson Financial.
Still, Wall Street’s bulls insist that the second quarter is ancient history--and that investors should look ahead to an expected earnings recovery in 2002.
Warnings late Thursday from tech giants Advanced Micro Devices, EMC and BMC Software will test the bullish thesis today, analysts noted.
Among Thursday’s highlights:
* Cisco Systems, the No. 1 manufacturer of computer-networking equipment, sank $1.61 to $17.58 after Marconi’s warning. Cisco was the most active stock.
* Lucent Technologies, the largest U.S. maker of phone equipment, dropped 39 cents to $6.30. The French newspaper La Tribune said without citing sources that Alcatel cut its bid for Lucent’s optical-fiber and cable unit to $3 billion from $4 billion.
* Semiconductor-related stocks fell after ASML, a Dutch maker of machines that etch circuits onto semiconductors, said it expects a first-half net loss of as much as $89 million, stemming mainly from its U.S. operations. Applied Materials, the biggest maker of chip equipment, lost $1.55 to $48.68, KLA-Tencor fell $1.71 to $57.31.
* Oil stocks rose along with the price of crude oil. Sunoco rose $1.38 to $35.91, Conoco gained 70 cents to $28.90 and Chevron advanced 93 cents to $91.32.
* Argentine bonds sank, pushing yields to a record high, as investors doubted a likely accord with provinces to decrease spending would be enough to bolster the country’s finances to ensure debt payments.
The bond market’s woes sent Argentine stocks down 3.4%.
Market Roundup, C5-C6
