Wall St. holds steady
Stocks dither amid conflicting corporate news ahead of Greenspan testimony
NEW YORK (CNNfn) - U.S. stocks finished little changed Wednesday in a session made directionless by a mixed batch of corporate earnings reports.|
For stock investors trying to divine the economy's health, few hard clues emerged. 3M met lowered fourth-quarter forecasts while DuPont posted a profit decline that topped Wall Street estimates. At McDonald's, earnings both fell and disappointed investors. But Compaq Computer came in with surprisingly strong financial results.
Investors showed reluctance to make big moves one day before Federal Reserve Chairman Alan Greenspan testifies before the Senate Banking Committee. Five days later, the Fed meets to set interest rates.
"There's still some nervousness ahead of the Fed meeting," said Seth Martin, equities analyst for IDEAglobal.com.
But interest rates and quarterly financial reports were just part of the day's news. Both Lucent Technologies and AOL Time Warner announced big layoffs.
The Nasdaq composite index seesawed throughout the day before ending higher, up 18.76 points to 2,859.15. But the Dow Jones industrial average shed 2.84 to 10,646.97, following a session of similar swings. The S&P 500 edged up 3.92 to 1,364.32.
Market breadth was nearly even on the New York Stock Exchange, where advancing issues edged out declining ones 1,440 to 1,411, as more than 1.2 billion shares were traded. Nasdaq winners topped losers 2,074 to 1,740. More than 2.5 billion shares changed hands
In other markets, the dollar rose against the yen and the euro. Treasury securities edged lower.
Investors Thursday will parse Greenspan's words or clues about interest rates, which the Fed sets next week.
Economist expect that the central bank, faced with a slowing economy, to lower borrowing costs on Wednesday -- but by how much remains unclear. Some forecast an aggressive half-percentage point cut, identical to the one on Jan. 3, when the Fed surprised the market. Others see only a quarter-percentage point cut in borrowing costs.
John Forelli, senior vice president and portfolio manager
Independence Investment Associates, is looking further ahead.
"The relevant question isn't whether the Fed will cut rates by (a quarter or half-percentage point) next week, but whether it will cut rates another (1 or 2 percentage points) by the summer," Forelli said. "I'm expecting the Fed to be aggressive and that will help determine whether we pop or slog our way out of this slump."
The slump was evident in the day's corporate financial reports, which showed companies having trouble meeting expectations.
Lucent Technologies (LU: Research, Estimates) reported a fiscal first-quarter loss of $1.02 billion, or 30 cents a share, 3 cents wider than Wall Street forecasts. The company also said it is cutting 10,000 jobs -- about 8 percent of its work force -- and taking a charge of up to $1.6 billion. Its shares, off 66 percent over the last 52 weeks, rose 81 cents to $19.63.
Lucent isn't the only firm reducing employees. The newly merged AOL Time Warner (AOL: Research, Estimates) said it will cut 2,000 jobs in addition to the 400 already announced at its CNN unit, and is planning to close or sell its 130 Warner Bros. Studio stores. Shares of AOL, which owns CNNfn, rose $1.60 to $55.75.
Minnesota Mining & Manufacturing (MMM: Research, Estimates), the maker of Post-it Notes and Scotch Tape, fell $3.88 to $107.13 after reporting nearly flat fourth-quarter earnings of $447 million, or $1.12 a share. The results, which added details to preliminary figures issued last week, were little changed from last year and met the company's lowered targets.
McDonald's (MCD: Research, Estimates) fell $2.06 to $30.81 after the fast food company missed Wall Street earnings targets by 1 cent a share. McDonald's said fourth-quarter profit fell to $452 million, or 34 cents a share, down from $486 million, or 35 cents a share a year earlier.
Chemical maker DuPont (DD: Research, Estimates) slid 19 cents to $41.88 after reporting lower fourth-quarter earnings that were slightly above forecasts.
Profit growth has slowed in the last quarter, but analysts are unsure how much that cooling is already reflected in stock prices, which fell in December. Still, technology stocks have rebounded somewhat this month. After falling a record 39.2 percent in 2000, the Nasdaq is up 15.7 percent year-to-date.
That trend continued Wednesday. Compaq Computer (CPQ: Research, Estimates) rose $1.80 to $21.85 after the company posted fourth-quarter earnings of 30 cents per share, topping lowered Wall Street expectations. More importantly, Compaq said it's comfortable with analysts' forecasts for 2001, countering a trend of warnings.
A record number of companies, more than 700, have pre-announced revenue or earnings disappointments for the December quarter.
Microsoft (MSFT: Research, Estimates) was among them, but its stock along with Sun Microystems (SUNW: Research, Estimates) rose one day after settling a licensing lawsuit. In the agreement, Microsoft will pay its rival a lump sum of $20 million for use of its Java technology in Microsoft products during the next seven years. Microsoft rose $2.38 to $62.94 while Sun climbed $1.19 to $32.75.