Wall Street braces for tech earnings
Wall Street stumbled lower Monday as growing concerns over technology companies led jittery investors to pull money out of the market ahead of this week’s earnings reports.
The market has been vulnerable to erratic trading lately, with investors cautious about the direction of the economy and companies’ results. The tech sector so far has been knocked down the most, after Apple’s and Intel’s outlooks last week fell below the Street’s expectations.
With industry leaders such as Qualcomm and Microsoft releasing their financial results later this week, many investors are bracing for disappointment.
“The market is nervous,” said Joe Ranieri, managing director in equity trading at Canaccord Adams. “We’ve had a few good quarters in a row in tech land. The problem with having good quarters is, it gets harder and harder to impress.”
Blue-chip stocks were dragged down by a Wachovia analyst’s downgrade of Boeing; the analyst cited possible aircraft order delays from the jet maker.
Overall, earnings reports and economic data this year have signaled growth that is cooling, but not so quickly that it is squeezing corporate profits.
This would normally be good news for the stock market, but investors have been retreating -- wisely, many market watchers say -- on signs that they may have gotten ahead of themselves late last year, when the Dow began racing into record territory.
The Dow Jones industrials fell 88.37 points, or 0.7%, to 12,477.16 -- the biggest one-day drop since Nov. 27, when the index fell by 158 points. Earlier in Monday’s session, the Dow declined by 114 points.
Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 7.55 points, or 0.5%, to 1,422.95, and the Nasdaq composite index lost 20.24 points, or 0.8%, closing at 2,431.07.
The Russell 2,000 index of smaller companies was down 7.20 points, or 0.9%, at 777.96.
The stock indexes rebounded slightly from the session’s lows after prices on crude oil futures resumed their downtrend, falling 86 cents to $51.13 a barrel Monday on the New York Mercantile Exchange, after briefly rising above $53.44.
Despite the market’s recent aversion to technology stocks, the Dow, S&P; and tech-dominated Nasdaq are all still up on the year. Stocks have the potential to rally, especially as earnings season winds down, Ranieri said.
“If we get through the next few weeks without disastrous earnings, some buyers will start picking up the stocks that are getting beat up now,” he said.
A separate worry weighing on the market is interest rates. A report from the Chicago region’s Federal Reserve indicated above-trend growth in December for the first time in four months -- yet another argument for U.S. Fed policymakers to keep rates on hold, or perhaps even hike them.
The market is in a tug of war right now over whether rates will be raised or lowered later in the year, said Jim Herrick, manager and director of equity trading at Baird & Co.
“Also, some believe oil will continue to go lower, some believe oil will go back to the levels of last year,” Herrick said. “There’s two camps right now, and that’s why we’re having this volatility.”
The yield on the benchmark 10-year Treasury note edged lower to 4.76%, from 4.78% on Friday.
In other market highlights:
* Technology-related worries were kindled by analyst downgrades of Cisco Systems, the world’s largest networking equipment maker; Motorola, the second-largest cellphone maker; and computer maker Dell.
Cisco fell 17 cents to $26.53; Motorola fell 55 cents, or 2.9%, to $18.72; and Dell dropped 53 cents, or 2.1%, to $24.49.
* Chip maker Advanced Micro Devices fell after rival Intel and Sun Microsystems announced an alliance that could take away some business from Advanced Micro.
Advanced Micro, which will release its earnings today, fell 20 cents to $17.53. If Advanced Micro’s earnings report comes in better than expected, the tech sector could rebound.
* Texas Instruments reported after the market closed that its fourth-quarter earnings surpassed Wall Street estimates, and that it would slash jobs to reduce costs.
The cellphone-chip maker rose 20 cents to $28.59 in regular trading. In the after-hours market, it jumped to $29.40.
* Pfizer, the world’s biggest drug maker, reported better-than-expected earnings but also that it was cutting 10,000 jobs in an effort to slash costs. Pfizer fell 27 cents to $26.95.
* Boeing fell $3.03, or 3.4%, to $85.60 after Wachovia’s downgrade.
* Overseas, Japan’s Nikkei stock average rose 0.7%. Britain’s FTSE 100 was down 0.3%, Germany’s DAX index was down 0.9%, and France’s CAC-40 was down 0.6%.
