Stocks Dive as Investors’ Profit Hopes Dim
The stock market fell sharply Monday as skittish investors sized up more second-quarter earnings and braced for the likelihood that the economic slowdown will mean another spate of profit warnings.
Although there were no major earnings disappointments that drove prices downward, investors saw little reason to buy stocks.
“There’s absolutely no urgency. The frustration level in the marketplace is extreme,” said Scott Bleier, chief investment strategist for Prime Charter Ltd.
The Dow Jones industrial average finished the day down 152.23 points, or 1.4%, at 10,424.42.
The broader market also finished lower with the Nasdaq composite index falling 40.81 points, or 2.0%, to 1,988.56 and the Standard & Poor’s 500 index declining 19.82 points, or 1.6%, to 1,191.03.
Hopes that earnings and the economy would improve by year end have dimmed in recent weeks as more than 800 companies warned of shrinking profits and many others said business is so uncertain they can’t make accurate projections.
“We are all starved for pieces of good information to make us feel better, but that information is just not there yet,” said Charles White, portfolio manager for Avatar Associates.
Market observers were doubtful any losses--or gains--would last, given how the market has reacted recently, canceling out its losing and advancing sessions as companies report earnings.
Analysts also say the market could still trend higher in the fourth quarter, when companies’ profits will look better when compared with the weakened results of the last three months of 2000.
“The economy is in a rough road. You are still making comparisons over a good [quarter] last year,” said Al Mirman, market strategist at V Finance in Sarasota, Fla.
Among Monday’s biggest losers were companies that warned of tough business ahead. Lexmark International, which beat second-quarter expectations but reduced its third-quarter forecast, dropped nearly 64%, losing $9.14 to $49.51. Goodyear Tire, which met expectations but said production must be curtailed, fell $1.80 to $29.84.
Dow industrial component 3M slid $1.68 to $111.32. The company beat expectations but warned that slower growth abroad and the strong dollar would hurt results for the remainder of 2001.
Wall Street’s losses were spread across most sectors, a sign that investors doubt that any business is capable of doing well in the slowing economy.
Microsoft sank $2.09 to $67.09, General Electric dropped $1.33 to $45.30, and Wal-Mart fell $1.25 to $53.03. All three are Dow components.
Only three Dow stocks moved higher. American Express, which met earnings forecasts, inched up 15 cents to $38.13, while McDonald’s rose 25 cents to $27.77 and IBM advanced 15 cents to $105.85.
Other gains included Cisco, up 28 cents at $18.27 on an upgrade to “buy” from “hold” by UBS Warburg, and toy maker Hasbro, up 48 cents at $15.48 after reporting a second-quarter loss that was 2 cents a share narrower than Wall Street was expecting.
Among the big losers were steel companies. The S&P; steel index tumbled 5% as USX-U.S. Steel Group, the largest U.S. steelmaker, fell $1.48 to $19.52 after reporting a loss for the second quarter.
Declining issues outnumbered advancers slightly more than 3 to 2 on the New York Stock Exchange. Volume was moderate.
While stocks fell, bond prices rallied as investors sought the safety of U.S. government securities. The yield on the benchmark 10-year Treasury note--which moves in the opposite direction of the price--fell to 5.10%, down from Friday’s close of 5.13%.
Market Roundup, C13-C14
