Stocks Slump on Weak Forecasts, Economic Data
Stocks sagged Wednesday after Coca-Cola and several other companies issued gloomy forecasts, and a lower-than-expected reading on industrial production for August threw the nation’s broader economic outlook into question.
Adding pressure to technology shares, Goldman Sachs Group lowered its ratings on hardware and software stocks based on its latest survey of corporate officers who oversee high-tech spending. With corporate forecasts falling short of expectations and a number of signals pointing to more modest capital spending, worries about a slower second half are intensifying, but analysts say it’s too soon to tell what lies ahead.
“We’ve been saying for a while that investors need to be much more selective.... This is a stock-picking kind of market,” said John Caldwell, chief investment strategist for McDonald Financial Group. “It may be that Coke’s problems are just Coke’s problems. On the flip side of that, there are a number of companies out there that are saying relatively good things.”
The Dow Jones industrial average slid 86.80 points, or 0.8%, to 10,231.36.
The other gauges were also lower. The Nasdaq composite index slumped 18.88 points, or 1%, to 1,896.52. The Standard & Poor’s 500 index lost 7.96 points, or 0.7%, to 1,120.37.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange.
The Federal Reserve reported only a 0.1% rise in industrial production in August, surprising economists who had forecast a 0.5% gain. The feeble rise, which follows a robust 0.6% advance in July, suggests that the economy may still be working through the “soft patch” Federal Reserve Chairman Alan Greenspan referred to in remarks before Congress last week.
However, the New York Federal Reserve’s manufacturing index for New York state rose to 28.3 in September, recovering from much of August’s slump to 13.2. New orders and shipments also recovered.
The New York survey was stronger than most analysts expected. Bond traders said it could be a sign that U.S. manufacturing overall would pick up this month, pushing up yields on U.S. Treasuries, which rise as their prices fall. The yield on the benchmark 10-year note closed at 4.16%, from 4.13% on Tuesday.
Already high oil prices, meanwhile, headed skyward this week as Hurricane Ivan menaced rigs, threw tankers off course and significantly cut daily production in the Gulf of Mexico. Prices fell back as the storm took aim at the Alabama and Mississippi coasts late Wednesday, and crude declined 81 cents to settle at $43.58 a barrel.
In an effort to quell anxiety about global crude supplies, the 11-nation Organization of the Petroleum Exporting Countries announced it would raise its target oil production by 1 million barrels a day later this year. Many analysts dismissed this as a largely symbolic gesture, however, because the cartel is already pumping beyond the new quota.
In other market highlights:
* Coca-Cola fell 4%, or $1.71, to $41.16 after warning that results for the second half of the year probably would fall short of expectations because of weaker sales and challenging conditions in key markets.
* The Goldman survey said corporations were lowering their projections on tech capital spending through next year, denting tech stocks. Cisco fell 79 cents to $19.56, Lucent Technologies shed 9 cents to $3.32, IBM was down 35 cents at $86.37 and Dell lost 61 cents to $35.41.
* Oracle added 78 cents to $11.33. The software company posted a 16% jump in its fiscal first quarter after the market closed Tuesday.
* Callaway Golf sank $2 to $10.30. Just before the market closed Tuesday, the Carlsbad, Calif., company said it would miss its sales and earnings estimates for the third quarter and full year.
* Taser International rallied $7.74, or 22%, to $43.09. The stun gun maker said the weapons had been approved for use by police in England and Wales.
* Best Buy gained $2.32 to $52.61 after reporting a nearly 8% increase in fiscal second-quarter earnings. The results beat analysts’ estimates by a penny a share.
