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Stocks see red again
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January 8, 2001: 5:05 p.m. ET
Shares fall for 3rd straight day but finish well above day's worst levels; earnings ahead
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NEW YORK (CNNfn) - U.S. stocks fell for a third straight session Monday amid more fears that corporate earnings reports that begin arriving this week will show surprising weakness.
Ahead of these fourth-quarter results, another round of companies readied investors for financial disappointments, spooking a market that has fallen steadily since the beginning of September.
"This really is a bad period in terms of warnings," Chuck Hill, director of research at First Call, told CNNfn's Market Call.
Hill said a record 574 companies have warned their financial results for the latest quarter will miss Wall Street's targets.
 Still, the major indexes ended well above the session's worst levels -- levels last seen before the Federal Reserve Wednesday slashed interest rates to jolt the economy.
This unexpected and dramatic rate cut sparked a historic rally. But those gains have mostly faded on concerns the move is too little, too late to turn around an economy whose slowdown has taken economists by surprise.
"The markets obviously liked it," Brett Gallagher, head of U.S. equities at Julius Bear, told CNNfn's market coverage, referring to the Fed's reduction in borrowing costs. "For a day."
Amid a string of profit and bottom-line warnings, the Nasdaq has fallen four out of five sessions in 2001 and -- after declining nearly 40 percent last year -- is down another 3.1 percent this year.
On Monday, the Nasdaq shed 11.73 points to 2,395.92, after falling as low as 2,299.65 at mid-afternoon. Those losses brought the index within sight of its 22-month low reached Tuesday, Jan. 2.
The Dow Jones industrial average fell 40.66 to 10,621.35 while the S&P 500 shed 2.49 to 1,295.86.
Investors seeking safety once again bought utility stocks after a recent pause related to California's energy problems. The Dow Jones utility index, which rose to a record in December, gained more than 2 percent.
 Market breadth was mixed. Advancing issues on the New York Stock Exchange beat declining ones 1,610 to 1,340 on trading volume of 1.1 billion shares. Nasdaq losers topped winners 2,222 to 1,626. More than 1.8 billion shares changed hands.
In other markets, Treasury securities declined. The dollar slid against the euro but rose versus the yen.
More earnings worries
Companies this week begin reporting their earnings for the final three months of 2000 -- a period when bottom lines are generally expected to have weakened relative to the year-ago period.
Among the disappointing pre-announcements, New Era of Networks (NEON: Research, Estimates) fell $2.4, or 43 percent, to $3.09 after the maker of Internet software said it expects to lose money in the fourth quarter, countering expectations for a profit.
 Iomega (IOM: Research, Estimates) lost 71 cents, or 17 percent, to $3.04 after the disk-drive maker warned late Friday that fourth-quarter financial results likely will fall short of forecasts.
And Ameritrade (AMTD: Research, Estimates), the online broker, fell 22 cents to $8.63 after saying it will post a much wider-than-expected first-quarter loss.
Other tech stocks also declined. Cisco Systems (CSCO: Research, Estimates) lost 9 cents to $36.53, while Oracle (ORCL: Research, Estimates) shed 19 cents to $29.94.
But these stocks ended well above their worst levels of the day. And some market watchers say the losses have gone too far, creating an opportunity to buy.
"I firmly believe these markets are so overdone, so oversold," Linda Jay, NYSE trader at RPM Specialists, told CNNfn's Market Call.
Click here for a look at tech stocks
All three major stock indexes fell last week, the first week of the new year. These losses came even as the nation's central bank, concerned about the economy's health, cut interest rates by a half percentage point. The Nasdaq rallied 14.2 percent, a record, that day.
But Art Hogan, chief market analyst at Jefferies & Co., sees little progress for the market until the Fed cuts rates again at its meeting later this month.
"I think we'll start getting investors into the marketplace later in the first quarter," Hogan told CNNfn's market coverage.
The last rate cut took back the Fed's last increase in May, a move some say went too far.
"Quite frankly, I think [Fed Chairman] Alan Greenspan and his cohorts at the Federal Reserve were way too aggressive" in raising interest rates, Eric Gustafson, senior portfolio manager at Stein Roe Farnham, told CNNfn's In the Money.
The latest rate cut comes amid falling consumer confidence and spending. Companies have eased up on hiring while manufacturing has cooled.
Stephen Roach of Morgan Stanley Dean Witter became the first economist at a major bank or brokerage to forecast a recession.
 Defined as two consecutive quarters of negative growth in the nation's gross domestic product, a recession, Roach said Monday, is now definite.
Meanwhile, Christine Callies, chief U.S. investment strategist at Merrill Lynch, Monday lowered her year-end forecast on the S&P 500 to 1,625 from 1,700 based on expectations for slowing profit growth. The revision, if it holds, would mean a 23 percent annual gain for the S&P 500.
More immediately, investors will be watching quarterly financial reports for hard information on the state of earnings.
Ahead, Yahoo! (YHOO: Research, Estimates), and Motorola (MOT: Research, Estimates) post fourth-quarter earnings after the close of trading Wednesday.
Both stocks fell sharply last year. Those losses continued Monday. Yahoo! fell $2.25 to $26.25 while Motorola dropped 25 cents to $20.94.
But Alcoa (AA: Research, Estimates) rose 50 cents to $33.63 after saying its fourth-quarter earnings rose 17 percent, to 45 cents a diluted share from 44 cents a share in the fourth quarter of 1999. The profit topped the First Call analysts' consensus by 3 cents a share. 
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