Profit Warnings Depress Stocks
Concerns about corporate earnings left stocks broadly lower Monday, with blue-chip indexes ending at five-month lows.
The bankruptcy filing of auto-parts manufacturing giant Delphi also cast a pall over the market and dragged many other auto-related shares down.
The Dow Jones industrial average slid 53.55 points, or 0.5%, to 10,238.76, its fifth loss in six sessions and the lowest close since May 13.
Wall Street, hurt in recent weeks by worries over inflation and interest rates, had been looking to third-quarter earnings reports to restore optimism.
However, analysts have been shaving profit estimates amid fears that high energy costs and other economic fallout from last month’s Gulf Coast hurricanes were limiting earnings growth.
On Monday, profit warnings from companies including chip maker Xilinx, computer services firm Unisys and defense giant Northrop Grumman set a sour tone for the session.
As of Friday, analysts had expected third-quarter earnings of nonenergy companies in the blue-chip Standard & Poor’s 500 index to be up 10% from a year earlier, according to data tracker Thomson Financial. But the consensus growth estimate had been 12% two weeks ago.
“Given the spike in oil during the third quarter, I think we’re going to see higher oil costs in manufacturing companies and lower sales in consumer companies from oil squeezing out other purchases,” said Tim Ghriskey, chief investment officer of Solaris Asset Management.
The S&P; 500 slid 8.57 points, or 0.7%, to 1,187.33, its lowest finish since May 18.
The technology-dominated Nasdaq composite fell 11.43 points, or 0.6%, to 2,078.92, a three-month low.
Falling stocks outnumbered rising issues by about 8 to 3 on the New York Stock Exchange and by 9 to 5 on Nasdaq.
Oil prices were little changed after declining sharply last week. Near-term crude futures in New York eased 4 cents to $61.80 a barrel. Natural gas also dropped.
Traders had the day off in the bond market, which was closed in observance of Columbus Day.
Among Monday’s market highlights:
* Delphi shares plunged 79 cents to 33 cents after the company filed for bankruptcy protection. GM, Delphi’s biggest customer, sank $2.81 to $25.48 amid worries about GM’s own financial health. Ford Motor lost 30 cents to $8.93, and DaimlerChrysler tumbled $1.83 to $50.76.
Another parts maker, Dana, plummeted $3.15 to $6.04 after saying it would restate earnings for 2004 and the first half of 2005 because of previously disclosed accounting issues. Among other parts makers, Magna International dropped $2.95 to $66.56, and Eaton fell $1.20 to $60.40.
* In the tech sector, Xilinx slid $4.35 to $22.77. The firm said weakness in Asian demand would mean lower-than-expected third-quarter chip sales.
Other chip shares losing ground included Intel, down 40 cents to $23.42; Motorola, off 78 cents to $20.82; and Broadcom, down $1.79 to $44.68.
* Unisys sank 82 cents to $6.01 after saying it lost money in the quarter just ended. The company didn’t explain the loss.
* Northrop Grumman fell 57 cents to $53.48 after warning that hurricane damage to its shipyards would clip 2005 profit.
* Alcoa provided some good news. After regular trading ended, the aluminum producer reported third-quarter earnings that were up slightly from a year earlier, despite higher energy costs. The stock, down 38 cents to $22.66 in regular trading, rose to $23.15 in after-hours activity.
* Shares of home builders continued their recent slide. Ohio-based builder Dominion Homes said third-quarter profit would be lower than expected because of a drop in sales. Its shares plunged $2.35 to $12.23. Also in the sector, KB Home lost $2.37 to $64.58, Lennar dropped $2.49 to $55.11, and William Lyon Homes was off $12.70 to $121.55.
* Some Internet-related shares attracted buyers. EBay added 56 cents to $40.46, and Yahoo was up 37 cents to $34.53.
* Energy stocks were mostly lower. The sector has declined in six of the last seven sessions. Exxon Mobil fell $1.10 to $58.50, Valero Energy declined $2.66 to $105.04, and Kerr McGee slid $1.40 to $86.25. The XOI index of major oil issues is down 9.7% from its record high reached Sept. 29.
* Capstone Turbine plummeted 58 cents to $2.69. The Chatsworth-based developer of low-emission microturbines said it would sell as many as 17 million shares to investment groups in a capital-raising move. Some investors may have been reacting to the potential dilution of current shareholders’ interests.
