Downbeat Telecom Forecasts Hit Stocks; Dow Falls 120 Points
Stocks closed broadly lower Monday, hit by another wave of bad news from the telecom sector and general uneasiness about the outlook for corporate earnings.
In currency trading, the euro fell from a three-month high against the dollar after the first-round election victory of French presidential candidate Jean-Marie Le Pen, who heads the far-right party.
On Wall Street, stocks fell from the opening bell after WorldCom Group late Friday cut its sales forecasts for 2002 and as Swedish telecom equipment giant Ericsson issued a bleak earnings forecast and slashed jobs.
The tech- and telecom-heavy Nasdaq composite index slid 38.15 points, or 2.1%, to 1,758.68. The Dow industrials fell 120.68 points, or 1.2%, to 10,136.43.
Losers topped winners by 2 to 1 on Nasdaq and by 20 to 12 on the New York Stock Exchange in moderate trading.
The continuing barrage of bad news from the telecom industry is causing more investors to give up any hope of a rebound for that sector this year, analysts said.
That was evident from the plunge in WorldCom Group shares. The price sank $1.97, or 33%, to $4.01 on Nasdaq. Investors had hammered the stock down from $14.08 at year-end to $5.98 on Friday, before the company reduced its 2002 forecasts.
Ericsson shares dived 80 cents, or 23%, to $2.74.
Fear of a protracted recession for telecom and tech also hit such stocks as Cisco Systems, down 39 cents to $14.87; IBM, off $1.07 to $87.93; and Broadcom, off $1.66 to $36.90.
But the selling Monday was broader than telecom and tech. Bank, airline, retail and drug stocks also were weak. “Overall, I think the market is in a prove-it-to-me mood, rather than just hoping earnings will get better,” said Robert Harrington, trader at UBS Warburg.
Earnings of blue-chip firms overall were expected to be down in the first quarter, so investors have been focusing on what companies say about the rest of the year. Those forecasts have been mixed.
“To the extent that people are expecting a stronger second half of 2002, they might be disappointed,” said Robert Streed, manager of the Northern Select Equity Fund.
European stock markets closed mostly lower Monday, hit primarily by tech and telecom weakness. There also may have been concern about Le Pen’s victory in the French first-round election, analysts said.
The euro weakened from Friday’s three-month high of 89.2 U.S. cents, slipping to 88.9cents.
Le Pen opposes closer ties among European nations, but analysts say he is almost certain to lose to incumbent President Jacques Chirac in the May 5 vote.
Among Monday’s highlights:
* Telecom shares falling sharply included Qualcomm, down $2.23 to $35.03; Sprint PCS, off 97 cents to $11.19; WorldCom MCI, down 77 cents to $4.23; and Verizon Communications, down $2 to $40.
* Sellers chipped away at such big-name issues as Alcoa, off $1.77 to $35.71; Wal-Mart, down $1.38 to $57.55; and Johnson & Johnson, down $1.15 to $63.34.
* In the tech sector, Santa Ana-based simulation software firm MSC.Software plummeted $7.79, or 39%, to $11.97. The firm said it expects to post a first-quarter loss instead of a profit because of weak foreign markets and legal expenses.
* AOL Time Warner fell $1.06 to $19.87 as analysts doubted recent market rumors that the firm might consider spinning off its Internet unit.
* Spiegel dropped $1.70 to $1.10 after the owner of the Spiegel catalog and Eddie Bauer retail chain said it won’t be able to sell its credit card business for as much as expected.
* Airline shares sank on growing worries about the effects of new fare wars. Southwest slid 68 cents to $18.25, and Northwest lost 98 cents to $19.16.
* On the plus side, shares of home builders resumed their rally. Ryland jumped $4.14 to a record high of $103.64. William Lyon Homes surged $2.18 to $25.95.
Market Roundup, C8-9
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