Stocks Slide on Earnings Reports
Still skeptical about the stock market’s long-term potential, investors Tuesday cashed in some gains from almost two weeks of rallies, sending prices lower. Disappointing earnings from Kimberly-Clark, Wyeth and Texas Instruments also prompted some selling.
Analysts had expected the market to give back some of its recent advance, which over the previous eight sessions had boosted the Dow Jones industrials more than 1,200 points.
After falling as much as 162 points Tuesday, the Dow closed down 88.08 points, or 1%, at 8,450.16. The Nasdaq composite index fell 16.87 points, or 1.3%, to 1,292.80. The Standard & Poor’s 500 index declined 9.56 points, or 1.1%, to 890.16.
Losers outnumbered winners by 2 to 1 on the New York Stock Exchange and by 4 to 3 on Nasdaq in moderate trading.
Since hitting multiyear lows Oct. 9, the Dow and Nasdaq have jumped 16%. The S&P; 500 has climbed 14.6%.
“Given the strength of the rally, it was appropriate to expect a pause. The fact that you are getting less compelling earnings news today from market leaders like Texas Instruments and Kimberly-Clark also gives rise to a pause,” said Jack Caffrey, equities strategist J.P. Morgan Private Bank.
Some analysts and investors are wary of the latest advance, worried they will be faked out by what might be another bear market rally, such as the one-week surge in late July when the Dow jumped more than 1,000 points.
But others are optimistic and say this time could mark a real upward trend, largely because earnings news has been stronger than expected.
About 255 Standard & Poor’s 500 companies have posted their quarterly earnings. Sixty percent of the firms have topped analysts’ expectations, while 12% have missed estimates, according to Thomson First Call. The companies are posting profit growth of 10.4% on average, compared with 1.4% in the second quarter, First Call said.
In other highlights:
* Texas Instruments put a dent in Wall Street’s newfound optimism, falling $3.12 to $14 and ranking as the most active on the NYSE. The world’s largest maker of semiconductor chips for cellular phones reported a third-quarter profit in line with expectations, but drastically cut fourth-quarter forecasts due to a softness in orders. The SOX semiconductor index fell 6.1%. Chip leader Intel lost 33 cents to $15.12, and leading chip equipment maker Applied Materials fell 95 cents to $13.09.
* Kimberly-Clark sank $6.18 to $50.50 after the consumer products maker missed third-quarter earnings expectations by 4 cents a share and said its 2002 results will come in below analysts’ estimates.
* Video game publisher THQ, which plunged in after-hours trading Monday after warning that the current quarter and year would be at the low end of estimates, dragged other game firms lower. Electronic Arts lost $5.54 to $66.60, Activision sagged $3.87 to $19.90 and Take-Two Interactive Software fell $1.42 to $26.21. THQ, based in Calabasas Hills, closed down $8.37 at $14.80, ranking as the largest percentage loser on Nasdaq.
* Exxon Mobil fell 82 cents to $35.18 and helped pressure the Dow. World oil prices fell Tuesday, extending the previous day’s dramatic plunge after President Bush said Iraq could be disarmed peacefully.
* Drug makers Wyeth and Pharmacia slumped after posting anemic third-quarter results, as consumers weigh the risks and rewards associated with taking their flagship medicines for menopause and arthritis. Wyeth fell $1.30 to $34.35. Pharmacia dropped $1.20 to $42.25.
* Japan’s Nikkei stock average finished down 3.2%. In Europe, France’s CAC-40 index fell 1.1%, Britain’s FTSE 100 declined 0.4% and Germany’s DAX index dropped 3.9%.
Market Roundup, C6-7
