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Wall St. breaks win streak
NEW YORK (CNNfn) -- A rash of corporate profit warnings handed U.S. stocks their first loss in nearly a week Wednesday. The Dow Jones industrial average broke a four-day winning streak after two of its components, J.P. Morgan Chase and Hewlett-Packard, said that a slowdown in business will cut into sales. As the June quarter entered its final weeks, disappointments spread beyond Dow stocks. Bank One, money manager Neuberger Berman and chip equipment maker ATMI all said quarterly profits will likely fall short. The Nasdaq composite index fell for the first time since last Wednesday. But Robert Goodman, senior economic advisor of Putnam Investments, sees the warnings as a prelude to gains.
"What you have now is corporations trying to manage expectations with the intent later this year and certainly early next year of beating those expectations," Goodman told CNNfn's Street Sweep. "So this market is really getting set up for a major change in perception once we begin to see some kind of economic pickup." The Dow industrials slipped 105.60 points, or 0.94 percent, to 11,070.24 while the Nasdaq shed 15.93, or 0.7 percent, to 2,217.73. The S&P 500 dropped 13.54, or 1 percent, to 1,270.03. More stocks fell than rose. Declining issues on the New York Stock Exchange topped advancing ones 1,879 to 1,205 on trading volume of 1 billion shares. Nasdaq losers beat winners 2,205 to 1,617 as 1.7 billion shares changed hands. In other markets, the dollar rose against the yen and euro. Treasury securities edged higher. In a Securities and Exchange Commission filing, J.P. Morgan (JPM: down $1.66 to $46.84, Research, Estimates) said the weak economic environment will hurt its investment banking and trading business through the end of the year. J.P. Morgan didn't lower its earnings targets. But analysts at UBS Warburg, Merrill Lynch, Salomon Smith Barney and ABN Amro did. Other financials also fell, including fellow Dow components American Express (AXP: down $0.72 to $41.88, Research, Estimates) and Citigroup (C: down $0.71 to $51.86, Research, Estimates).
Neuberger Berman (NEU: down $5.35 to $75.19, Research, Estimates), which manages $59.2 billion, and Bank One (ONE: down $0.09 to $38.96, Research, Estimates), the nation's fifth-largest bank holding company, both signaled that profits in the current quarter will fall below estimates. Michael Plodwick, who covers Bank One for UBS Warburg, cut his first- quarter profit targets to 60 cents per share from 65 cents per share. Hewlett-Packard (HWP: down $1.34 to $28.71, Research, Estimates), at its semi-annual business update to analysts, became the latest technology company to say the slowdown in information technology spending dampened sales. Lenny Weiss, founder of money management firm Weiss Wealth Management, said the markets, after gaining in April and May, likely will go sideways before heading higher. "Now the market needs to mark some time and get the second-quarter numbers out of the way," Weiss said. As a tech company dealing with weak demand and swelling inventories, Hewlett-Packard is hardly alone. Sun Microsystems, Cypress Semiconductor and Altera have all readied Wall Street for shortfalls in recent days. Among the latest, ATMI (ATMI: down $2.36 to $27.60, Research, Estimates) lowered its sales and profit targets for the current quarter, blaming a slowdown in orders from the chip companies it supplies. "We doubt that the markets are going to take off here," Christine Callies, chief U.S. investment strategist at Merrill Lynch, told CNNfn's Before Hours. "I think we will need more evidence that in fact things are starting to turn."
Technology companies, whose shares have suffered the biggest losses during the last 15 months, offered some promising news Wednesday. Citrix (CTXS: up $4.25 to $27.96, Research, Estimates), which makes applications software, said it expects financial results for the second quarter to top forecasts. And Goldman Sachs said the worst could be over for Sun Microsystems (SUNW: up $0.59 to $17.61, Research, Estimates), Nasdaq's most actively traded stock Wednesday with 81 million shares changing hands. Among other winners, Procter & Gamble (PG: up $0.59 to $64.67, Research, Estimates) rose after Lehman Brothers upgraded the consumer products maker to "buy" from "neutral." Oil stocks, which have mostly gained this year, fell after news indicated that supplies may not be as tight as previously thought. The American Petroleum Institute reported late Tuesday that supplies of oil and gas rose last week. Exxon Mobil (XOM: down $2.15 to $89.40, Research, Estimates), the world's biggest oil producer, was among the biggest Dow losers. Oil futures fell 52 cents to $27.72 a barrel in New York. The quarter ending this month already is expected to be the worst period for profits since the summer of 1991. But Weiss of Weiss Wealth Management, like others, is betting that the Federal Reserve's five rate cuts this year – and the promise of another later this month – will boost the economy in the months ahead. Profit comparisons, he added, will also get easier in coming quarters. "We've had a great rally and I think that's going to continue," Ned Riley, chief investment strategist at State Street Global Advisors, told CNNfn's Market Call. The Nasdaq, off 56 percent from last year's high, is 35 percent above this spring's low. Up 18.5 percent from its low, the Dow industrials are only 5.5 percent below their all-time high. Mark Donahoe, institutional equity trader at U.S. Bancorp Piper Jaffrey, said the market's losses through March mostly reflect the dismal profit news expected during the current quarter. "Sentiment is good, breadth is good; I'm very positive on the market going forward," Donahoe told CNNfn's The Money Gang. In another positive, the initial public offering market, which all but dried up late last year, showed some strength Wednesday. Unilab (ULAB: Research, Estimates), a provider of lab testing services, rose more than 43 percent in its first day of trading. Note: Search results will open in a new browser window
RELATED STORIES: European markets – June 6, 2001 RELATED SITES: Asian markets – June 6, 2001 |
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