Stocks Fall on Earnings Worries
Stocks slumped in a wobbly session Thursday as sour outlooks from companies such as chip maker Advanced Micro Devices and Bank of New York overshadowed surprising strength in the service sector of the U.S. economy.
“The volatility reflects ambiguity and uncertainty,” said Hugh Johnson, chief investment officer at First Albany, as the blue-chip Dow crisscrossed the break-even line much of the day. “You have some news that is good and some news that is not so good.”
The Dow Jones industrial average closed down 38.42 points, or 0.5%, at 7,717.19. The Nasdaq composite index fell 21.74 points, or 1.8%, to 1,165.56. The Standard & Poor’s 500 index lost 8.96 points, or 1.1%, to 818.95.
Losers beat out winners by 4 to 3 on the New York Stock Exchange and Nasdaq in moderate trading.
The Dow rallied almost 160 points in early trading after a report showed that growth in the services sector picked up in September to its fastest pace since July. But other data showed a rise in weekly jobless claims, heightening concern before the September employment report due out today.
Corporate profit warnings also helped shoo investors out of the market. Advanced Micro sank 32.4%, losing $1.74 to $3.63 after warning that quarterly revenue would be below expectations. Rival chip maker Intel lost 46 cents to $13.84. Chip equipment-making leader Applied Materials sank $1 to $11.50. The SOX semiconductor index tumbled 6.5%.
Bank of New York fell $2.81 to $23.95 and helped pressure other financial stocks. The company warned late Wednesday of lower third-quarter earnings because of charges for bad loans and losses on bank stock holdings.
Citigroup lost $1.09 to $28.51, Comerica, which also issued a profit warning Wednesday, fell $2.43 to $37.57 and J.P. Morgan Chase fell 63 cents to $17.62. A key index of bank stocks dropped 5.3%.
“Earnings in general have been terrible and that has put a lid on this market,” said Burton Schlichter, senior market analyst with Lind-Waldock. “As long as these warnings come out, we should not expect a rebound soon.”
But investors got an encouraging outlook from chemicals giant DuPont, which added 43 cents to $37.74, and an upbeat brokerage call on chip giant Motorola, which gained 31 cents to $10.46.
In other highlights:
* Crude oil had its biggest drop in three weeks after Hurricane Lili hit Louisiana with less force than predicted, easing concern that offshore rigs and coastal refineries would be damaged. In New York trading, crude fell 73 cents to $29.76.
* Irvine-based chip maker Broadcom fell $1.33, or 11.6%, to $10.18 after Salomon Smith Barney analyst Clark Westmont downgraded the stock from “in-line” to “under-perform”--the equivalent of a “sell” recommendation in Salomon’s stock-rating system.
* Japan’s benchmark Nikkei index fell 1.3%, closing below 9,000 for the first time in 19 years. Bank stocks were especially hard hit on concerns the government will force banks to write off their bad loans.
Market Roundup, C7-8
