Concerns about weak corporate profits steam-rolled Wall Street again Tuesday, flattening an early rally sparked by bullish comments from tech bellwether Oracle.
Analysts weren't surprised, noting that the rest of the nation's business picture is still murky--intensifying the caution of investors already burned by the market's fluctuations.
"For every Oracle, there are still companies out there that are indicating difficulties with near-term earnings," said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore.
The Dow Jones industrial average closed down 48.71 points, or 0.5%, at 10,596.67, erasing an earlier gain of 94 points. Broader stock indicators also struggled. The Nasdaq composite index rose 4.03 points, or 0.2%, to 1,992.66, after failing to hold a 67-point gain. The positive finish halted a seven-session losing streak but still left the tech-laden index below 2,000 for a second straight day. Before Monday, the last time Nasdaq had finished below that benchmark was in mid-April.
Losers and winners were about even on the New York Stock Exchange, while decliners outstripped advancers by 7 to 5 on Nasdaq. Volume was active on both markets.
Technology stocks have been battered in recent weeks by earnings warnings from companies including Nokia and Sun Microsystems. Oracle's projections weren't enough to convince Wall Street that the worst was over. "Investors are not confident right now, and that's the problem," Cripps said.
Oracle rose $1.92 to $16.76, a 13% increase. Other software makers rallied, pushing the S&P; software index up 3.7%. Among the big gainers: Citrix Systems, up $2.53 to $28.19, Siebel Systems, up $3.61 to $41.90, and Mercury Interactive, up $3.47 to $54.84. Even Microsoft, subject of an earnings warning from analysts, eked out a gain, rising 44 cents to $67.32.
But the broader tech sector was choppier. Big losers included Ciena, down $2.12 to $36.74, and Dow component Hewlett-Packard, off 71 cents at $26. Troubled Nortel Networks, which announced another round of layoffs last Friday, fell 15 cents to $8.37 and hit a new 52-week low, as did Lucent Technologies, off 11 cents to $5.50.
The Dow also was hurt by losses in Honeywell and General Electric, after a top GE executive said there is no chance its $41-billion acquisition of Honeywell will proceed because of stiff opposition from European regulators. Honeywell fell $1.50 to $38.50, while GE lost 13 cents to $48.87.
And in another sign of a weakening U.S. economy, AMR lost $1.52 to $34.40 after the parent of American Airlines and TWA said it expects to lose $100 million this quarter because of slowing business.
One bright spot in the market: financial stocks, which were lifted by gains in issues including Citigroup, up 96 cents at $50.75, and Lehman Bros., up $5.20 to $72.50.
Although the Federal Reserve is expected to lower interest rates for the sixth time this year when it meets next week, most market experts doubt it will have much, if any, effect on stocks.
Rather, they say, investors are more focused on companies' profit outlooks. The big rally this spring came on hopes that a business turnaround would occur by year's end.
"The conventional wisdom is that six months after the beginning of a rate-cut cycle, we should start seeing benefits. But it's been five solid months since the Fed began cutting rates, and we're not seeing that," said Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray.