Tech, finance shares drag down indexes
Stock prices dropped the most in a week on concerns about the earnings of financial and technology companies.
Tech shares tumbled after software giant Oracle posted worse-than-expected fiscal third-quarter sales late Wednesday and a research firm released data suggesting that growth in Google’s revenue from Internet ads could slow.
Oracle said the threat of a U.S. recession had made customers hesitant to spend.
“All the macro indicators show the economy is slowing, but we haven’t seen it hitting the company level too much outside of financials,” said Doug Peta, market strategist at J&W; Seligman & Co. in New York. “The Oracle news suggests that this could be the beginning.”
Oracle sank $1.51, or 7.2%, to $19.43. Google dropped $14.11, or 3.1%, to $444.08. Tech companies in the Standard & Poor’s 500 index lost 2.4% as a group.
Financial stocks in the S&P; 500 fell 2% as Lehman Bros. Holdings shares tumbled on rumors that the Wall Street firm was facing a funding shortage. The company called the speculation unfounded. Lehman closed down $3.78, or 8.9%, to $38.71.
But the sense of panic that emanated from the near-collapse of Bear Stearns at the start of last week has lessened, observers say. The Federal Reserve on Thursday auctioned $75 billion in credit to investment banks. Demand was solid but not at the desperate levels some investors had feared.
The Dow Jones industrial average fell 120.40 points, or 1%, to 12,302.46.
The Standard & Poor’s 500 index declined 15.37 points, or 1.1%, to 1,325.76, and the technology-heavy Nasdaq composite index slumped 43.53 points, or 1.9%, to 2,280.83.
The Russell 2,000 index of smaller companies fell 9.72 points, or 1.4%, to 692.39.
Declining issues outpaced advancers by about 5 to 3 on the New York Stock Exchange.
Yields on Treasury bonds rose. The benchmark 10-year Treasury note climbed to 3.53% from 3.46% late Wednesday. The dollar rose against other major currencies, and gold prices slipped.
Oil prices climbed after the bombing of a key oil pipeline in Iraq. Crude futures rose $1.68 to $107.58 a barrel on the New York Mercantile Exchange.
Bank shares slumped after Lehman analyst Jason M. Goldberg slashed by 7% his estimates of 2008 earnings for large and mid-size U.S. banks, saying he expected higher-than-forecast loan-related losses.
Bank of America slid $1.20, or 3%, to $38.64. JPMorgan Chase dropped $1.25, or 2.8%, to $42.86.
“There are a lot of unknowns in the financial sector which I think could be adding to the economic head winds that we’re going to be facing for the next 12 months,” Kevin Divney, a portfolio manager at Putnam Investments in Boston, told Bloomberg Television.
Merrill Lynch sank $2.52, or 5.7%, to $41.90 after Oppenheimer & Co. analyst Meredith Whitney predicted the company would report a first-quarter loss because of what she estimated would be $6 billion in write-downs on the value of debt securities.
George Shipp, chief investment officer at Scott & Stringfellow, said investors remained uneasy about whether they had an accurate read on the scale of troubles in the financial sector and to what degree the parade of write-downs on bad investments might continue.
“It’s hard to imagine there is going to be any good news. The question is whether it’s been discounted,” he said, referring to another round of potentially weak results from big banks in the coming months. “The market is groping for a bottom. It’s a difficult time.”
In other market highlights:
Carpinteria, Calif.-based CKE Restaurants dropped $1.47, or 12%, to $10.98, after the owner of the Carl’s Jr. and Hardee’s hamburger chains reported that its profit practically disappeared in the latest quarter.
ConAgra Foods surged $1.56 to $23.45 after posting a 60% jump in fiscal third-quarter profit and raising its forecast for the full fiscal year.
Williams-Sonoma fell $1.24 to $23.75. A weak U.S. economy caused the home-goods retailer to forecast fiscal 2008 profit and sales below Wall Street estimates.
EBay jumped $1.27 to $30.74. A Bank of America analyst raised his forecast of the online auctioneer’s sales.
Shares of home builders advanced after Lennar reported better-than-expected results. Lennar rose 31 cents to $17.90. KB Home rose 25 cents to $25.79. D.R. Horton climbed 33 cents, or 2.2%, to $15.53.
Stocks rallied in Europe. Key indexes gained 1% in Britain, 1.4% in Germany and 0.9% in France. Shares fell 0.8% in Japan.
