Muddled Outlook Batters Stocks
Cautious outlooks from Microsoft and IBM sent technology stocks tumbling Friday as investors worried that an economic recovery might be further delayed.
The tech-driven Nasdaq composite index closed out its worst week since the Sept. 11 attacks.
Analysts said the sharp drop was to be expected given all the buying investors indulged in late last year when they expected business to quickly turn around in 2002.
The tech sector took the brunt of the selling as Nasdaq fell 55.48 points, or 2.8%, to 1,930.34 and ended the week down 4.6%.
The last time Nasdaq had a bigger weekly percentage decline was Sept. 21 to 28, when it plunged 16% after the terror attacks.
The market’s other major indexes also posted sharp daily and weekly declines.
The Dow Jones industrial average sank 78.19 points, or 0.8%, to 9,771.85. For the week, the Dow fell 2.2%, notching its first back-to-back weekly losses since September.
The Standard & Poor’s 500 index stumbled 11.30 points, or 1.0%, to 1,127.58. It ended the week down 1.6%.
The downturn reflected the market’s disappointment with statements from Dow members IBM and Microsoft late Thursday in which both companies said they don’t know if a recovery has started.
Although the high-tech bellwethers beat earnings expectations, that wasn’t enough for Wall Street, which had been buying on the assumption the companies would confirm a turnaround is in progress.
IBM fell $5.65 to $114.25, while Microsoft tumbled $3.76 to $66.10.
The selling spread to other technology issues as well, including Intel, which issued a similarly cloudy forecast earlier this week. The chip maker, also a Dow member, fell $1.05 to $33.48.
“I don’t think people were expecting lots of positive comments about an economic recovery, but they were hoping for some glimmer of hope, and so far management has not provided that,” said John Forelli, portfolio manager for John Hancock Core Value Fund. “So people are taking profits instead of buying stocks.”
After two consecutive years of decline on Wall Street, investors aren’t willing to take many chances.
Such caution has led them to take profits from the market’s big fourth-quarter advance.
“People are gunshy. They know what happened in 2000 and 2001 and are much quicker to take profits,” said Richard A. Dickson, a technical analyst for Hilliard Lyons in Louisville, Ky.
In other market news Friday:
* Bond yields slipped as the fall in stocks lured investors to fixed-income securities.
The yield on the benchmark 10-year Treasury note fell to 4.89% from 4.93% on Thursday.
Yields were up for the week, however, as falling jobless claims and surging consumer confidence damped hopes that the Federal Reserve will cut interest rates again when it meets later this month.
* Sun Microsystems fell 25 cents to $12.12 despite posting a narrower-than-expected loss for its fiscal second quarter and raising its revenue expectations for the third quarter to $3.2 billion from $3.1 billion.
* Nortel Networks reported sales that declined steeply from the year-earlier period but were slightly above its previous forecast. Nortel, however, forecast a further 10% slide in revenue for the next quarter.
Nortel fell 24 cents to $7.50.
* Dell Computer fell 85 cents to $28.10 although it raised revenue and earnings forecasts for the fiscal fourth quarter, citing increased demand among consumers.
* Trading in New Energy of San Diego was suspended until February by the Securities and Exchange Commission, which questioned information released by the company.
New Energy said it would cooperate with the SEC.
The stock closed Thursday at $3.45, down $1.10.
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Market Roundup: C3, C4
