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Dow, Nasdaq edge lower
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May 7, 2001: 4:57 p.m. ET
Directionless session ends with slight losses after month of gains
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - U.S. stocks moved modestly lower Monday as fresh concerns about the strength of corporate profits sidetracked Wall Street's month-long rally.
FedEx, the delivery service, warned it will miss quarterly earnings targets, joining companies as diverse as Starbucks, Compaq Computer and Aetna. 3Com, meanwhile, said it will lay off 30 percent of its work force on the heels of a report showing the nation's unemployment rate rose to its highest level since 1998 in April.
 But since the end of the first quarter, which was a brutal time for stocks, Wall Street has looked beyond troubling economic and corporate news in a bet that lower interest rates will revive growth. Some expect the optimism to continue.
"I think we are transitioning from a bearish mood to a bullish mood," Al Goldman, chief market strategist at A.G. Edwards, told CNNfn's Market Call.
Most major indexes are down year to date. Still, stocks remain well above their worst levels of the year, hit in late March and early April.
"Now that the dropping has stopped, when do we start with the moving back up?" Michael Farr, president of Farr Miller and Washington, told Market Call. "That is the big question."
The Nasdaq composite index shed 17.98 points, or 0.8 percent, to 2,173.55 while the Dow Jones industrial average declined 16.07 to 10,935.17. The blue chip index came within 5 points of the 11,000 mark, a level it last close above in September. A broader gauge, the S&P 500, shed 3.10 to 1,263.51.
 More stocks fell than rose. Declining issues on the New York Stock Exchange topped advancing ones 1,595 to 1,457 on trading volume of 887 million shares. Nasdaq losers edged out winners 2,048 to 1,824 as 1.7 billion shares changed hands.
In other markets, the dollar edged higher against the euro and was little changed versus the yen. Treasury securities were flat.
Pausing from gains
Another round of troubling corporate news surfaced Monday as companies continue to have difficulty meeting profit or sales targets and are shedding jobs to save money.
Blaming a slowdown in orders, FedEx (FDX: down $1.00 to $40.28, Research, Estimates) warned that it will miss fiscal fourth-quarter and first-quarter earnings forecasts.
Portal Software (PRSF: down $3.35 to $5.93, Research, Estimates), which makes business software, said it expects to lose money in the current quarter, disappointing investors who expected a profit.
Click here for a look at other recent warnings
In an effort to cut costs, 3Com (COMS: down $0.38 to $6.52, Research, Estimates) said it will lay off 3,000 people, or 30 percent of its work force. The employees of the networking equipment maker are hardly alone. Last week, the number of Americans who applied for jobless benefits rose to a five-year high while the unemployment rate jumped in April to its worst levels since 1998.
Despite a string of bad news on the economy and from corporations, the markets have been rising during the last few weeks. The S&P 500 stands 15 percent above its April low. The gains came as many investors look beyond the current slowdown to a time when the economy will -- they hope -- pick up.
 "I think by the time we get to the fourth quarter and next year, things are going to get a lot better," David Braverman, senior investment officer at Standard & Poor's, told CNNfn's Before Hours.
The Federal Reserve has made many optimistic. Central bank policy makers, who have already cut interest rates four times this year, are expected to do so again next week. On Friday, expectations for a large rate cut helped ignite a rally.
"We're pricing in a 90 percent chance that the Fed will cut (by half a percentage point)," Michael Boss, bond futures trader at IBJ Lanston, told CNNfn's Market Call.
Two major deals in the energy sector drew attention Monday. Ultramar Diamond Shamrock (UDS: up $7.79 to $50.50, Research, Estimates) rose after agreeing to a $4 billion acquisition by Valero Energy (VLO: down $2.77 to $42.70, Research, Estimates), creating the second-largest U.S. oil refiner.
Williams Cos. (WMB: down $2.39 to $39.28, Research, Estimates) agreed to buy natural gas producer Barrett Resources (BRR: up $2.85 to $70.15, Research, Estimates) for about $2.5 billion in cash and stock.
One prominent analyst downwardly revised his market outlook Monday. Tom Galvin, U.S. equity market strategist for Credit Suisse First Boston, cut his year-end price targets for both the S&P 500 index and the Nasdaq.
Galvin, citing slowing profits, lowered his S&P 500 target to 1,450 from 1,520, while he trimmed the Nasdaq forecast to 2,600 from 3,000. Galvin's forecasts, if they hold, would mean the Nasdaq rising 5.2 percent this year, with the S&P 500 registering a 9.8 percent advance.
The Dow industrials have outperformed both of those indexes this year, ahead 1.4 percent.
One of the Dow's biggest gainers, Microsoft (MSFT: up $0.63 to $71.38, Research, Estimates), has been on a tear this year. Through Friday, shares of the biggest software maker had risen 63 percent in 2001.
But stock in J.P. Morgan Chase (JPM: down $1.40 to $49.20, Research, Estimates) helped keep the Dow from rising. Prudential Securities made the unusual move of downgrading Morgan to "sell," saying the economy's slowdown could lead to problems for the bank's loans.
Other stocks whose fortunes are tied to the cycles of the economy also fell. They include 3M (MMM: down $2.09 to $117.90, Research, Estimates), Alcoa (AA: down $0.90 to $41.00, Research, Estimates) and Wal-Mart Stores (WMT: down $0.97 to $52.05, Research, Estimates).
Cisco Systems (CSCO: down $0.39 to $19.25, Research, Estimates) also finished lower. After the close of trading Tuesday, the maker of computer networking gear is expected to post a profit of 2 cents a share for its fiscal third quarter, well below the 14 cents earned in the year-ago period. 
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