Stocks Fall on Weak Earnings, Economic News
Stocks tumbled Friday, giving back most of this week’s strong gains as gloomy corporate news and a report showing anemic U.S. economic growth put investors in a selling mood.
“Stocks are stuck in profit-taking mode as weak economic and earnings reports bring some more position paring at the week’s end,” said Bryan Piskorowski, an analyst at Prudential Securities.
The blue-chip Dow Jones industrials fell 133.69 points, or 1.6%, to 8,306.35. The Standard & Poor’s 500 index lost 12.62 points, or 1.4%, to 898.81. The technology-laden Nasdaq composite index dropped 22.69 points, or 1.6%, to 1,434.54.
Losers led winners by 5 to 3 on the New York Stock Exchange and by 3 to 2 on Nasdaq in modest trading.
Coming on the heels of Thursday’s losses, the declines marked the first back-to-back down days for the three major indexes since April 8 and 9. And although the Dow manage to stay above 8,300, the S&P; 500 ended the day below the psychologically important 900 mark.
For the week, the Dow fell 0.4%, while the Nasdaq and S&P; 500 gained 0.6%.
Chip makers such as Intel, down 67 cents to $18.28, ranked as the biggest losers in the market after a sour brokerage call on the key semiconductor sector. R.J. Reynolds Tobacco Holdings sank $6.02 to $28.18 after slashing profit estimates. Ford Motor fell 54 cents to $9.96 and GM dropped $1.04 to $35.62 after an investment bank cut its ratings on the carmakers.
This week marked the busiest period of the first-quarter earnings season, and many companies posted results that beat Wall Street’s expectations. Others, however, missed estimates or warned of tough conditions ahead. The market has climbed since mid-March, but investors still are worried about the health of the U.S. economy.
The government reported Friday that the nation’s gross domestic product, the broadest measure of the economy’s health, grew by 1.6% in the first quarter, missing expectations for a gain of 2.3%. Other reports showed an uptick in consumer sentiment and healthy new-home sales, but investors opted to lock in gains after a 6% climb in the S&P; 500 this month.
The latest selling occurred “as investors wring their hands over a number of concerns, ranging from a less-than-encouraging GDP report to the worldwide SARS epidemic,” noted Tom Reynolds, analyst with market advisory Schaeffer’s Investment Research, referring to severe acute respiratory syndrome.
In commodity trading, oil prices fell to a five-month low. The near-term contract for crude slipped 38 cents to $26.26 in New York trading. Yields on Treasury securities fell on the weak GDP report. The yield on the benchmark 10-year T-note fell to 3.89% from Thursday’s close of 3.92%.
In other highlights:
* Smith Barney downgraded the U.S. chip sector and cut estimates for the chip equipment sector, saying weak demand for handsets and PCs would affect both groups. Besides Intel, losers in the sectors included Novellus Systems, off $1.59 to $27.21; KLA-Tencor, down $1.96 to $38.94; and Linear Technology, off $2.12 to $33.75. The SOX index of chip stocks sank 5%.
* The RJR news hurt Dow member Altria Group, parent of cigarette maker Philip Morris USA, which skidded $1.89 to $31.01.
* The biggest Dow decliner was 3M, which fell $2.82 to $122.90 after Banc of America Securities cut its rating to “neutral” from “buy,” saying positives for the industrial conglomerate are reflected in its valuation.
* Costa Mesa-based Emulex tumbled $5.50, or 23%, to $18.88 after it said fiscal fourth-quarter sales would be slightly below Wall Street estimates.
