NEW YORK (CNNfn) - An unsettling business outlook from Microsoft sent U.S. stocks lower Friday, ending a turbulent week on Wall Street that brought no end to profit disappointments.
The latest trouble came from Microsoft, which said slowing computer sales would hurt earnings and sales. Just eight days ago, upbeat news from Microsoft sparked a rally.
That kind of up-and-down action typified this week's market, which rose Tuesday and Thursday but fell Monday and Wednesday.
Friday's losses for Microsoft, which fell 5 percent, spread to other computer-related stocks, like Intel, the No. 1 chip supplier. Gateway also tumbled after the computer maker lost more money than analysts expected.
"We keep getting earnings reports that are horrific," Peter Mancuso, NYSE trader at Performance Specialist Group, told CNNfn's Market Call.
Still, Linda Jay, NYSE floor trader at LaBranche & Co., said she was encouraged by how well the market, which ended off its worse levels of the day, held up.
"You would have thought that the news out of Microsoft would have done a lot more damage," Jay told CNNfn's Market Call. "The bulls keep trying."
Bulls found encouragement in Sun Microsystems, whose profit met forecasts, and eBay, which topped estimates. Both stocks rose Friday.
But the Nasdaq composite index declined 17.22 points, or 0.8 percent, to 2,029.34, dipping 2.6 percent on the week. The Dow Jones industrial average sagged 33.35 to 10,576.65, but managed a 0.3 percent gain over the last five sessions. The S&P 500 dropped 4.17 to 1,210.84, falling 0.4 percent on the week.
Market breadth was mixed. On the New York Stock Exchange, advancing issues beat declining ones 1,545 to 1,494 as 1.1 billion shares traded. Nasdaq losers topped winners 1,879 to 1,687 as 1.6 billion shares changed hands.
In other markets, the dollar fell against the yen but was little changed versus the euro. Treasurys dipped lower.
A solid performer falters
In the latest major disappointment, Microsoft (MSFT: down $3.39 to $69.18, Research, Estimates) said its sales and earnings would miss forecasts in the current quarter because of the slowdown in computer sales.
While the company's profit in the last quarter matched forecasts, investors seeking signs of improvement found little to like when executives reined in growth estimates.
Just last week, Microsoft painted a picture of stability, saying it was on track for its fourth quarter, ended June 30. Its shares rose 8 percent that day. That's among the reasons for the strong performance of Microsoft stock, which had risen 57 percent year-to-date through Thursday's close.
But going forward, Salomon Smith Barney downgraded Microsoft Friday to "outperform" from "buy." Still, Lehman Brothers, in a note to clients, called any Microsoft weakness a buying opportunity.
Gateway (GTW: Research, Estimates), the PC maker, late Thursday posted a wider-than-expected second-quarter loss and said results for the second half will be weaker than previously forecast.
Intel (INTC: down $0.03 to $29.93, Research, Estimates), which supplies chips that run Microsoft's Windows operating systems to computer makers, also fell.
"There's a lot of confusion out there over Microsoft," said Nick Angilletta, head of retail sales trading at Salomon Smith Barney. "There's not a lot of good news out there."
Angilletta said investors are no longer trying to pick the market's bottom like they were this spring, content to wait for stability. The Nasdaq is down 18 percent on the year while the Dow of off 2 percent in 2001.
A $19 billion loss
Nortel Networks (NT: down $0.21 to $7.54, Research, Estimates) offered little stability. The maker of telecommunications equipment posted stunning losses of $19.4 billion, including intangible assets, writedowns and other charges. Nortel said its losses from continuing operations of $1.55 billion, or 48 cents a share, matching forecasts.
PMC Sierra (PMCS: down $4.07 to $27.24, Research, Estimates) said it lost 8 cents a share, matching forecasts. Goldman Sachs cut its financial outlook for the maker of communications chips.
The continued drumbeat of weak results has analysts pushing their targets for a recovery further into the future. "I think the fourth quarter will be positive on earnings," John Davidson, chief investment officer at Circle Trust, told CNNfn's Before Hours.
But not all tech stocks fell. Sun Microsystems (SUNW: up $0.59 to $15.03, Research, Estimates) reported fiscal fourth-quarter earnings that, while sharply lower than a year earlier, were at the top end of recently lowered expectations. The workstation and software maker also said it will at least break even in its current quarter.
And eBay (EBAY: up $2.40 to $66.80, Research, Estimates), the online auctioneer, said its earnings more than doubled, topping forecasts, and issued a promising forecast for the remainder of 2001.
Another tech winner was IBM (IBM: up $1.70 to $105.70, Research, Estimates), following two days of losses.
Outside of the tech sector, drugmaker Merck (MRK: down $0.87 to $66.43, Research, Estimates) said profit rose to 78 cents a share, matching forecasts.
No quarter
The markets have shown erratic movements as investors try to determine just when profits will recover.
Just Thursday, stocks rose when Nokia (NOK: down $0.31 to $19.20, Research, Estimates) and Dell Computer (DELL: down $0.49 to $27.89, Research, Estimates) signaled that their businesses were in good shape.
But the week was one where American Express said it will take big charges for the recently ended second quarter and J.P. Morgan Chase said its profit fell to 33 cents a share, well off the Wall Street consensus forecast.
Once all the reports are in, the quarter ended in June is expected to be the worst period for corporate profits in a decade, with earnings forecast to drop about 18 percent.
Of the 235 companies in the S&P 500 that have reported so far, 145 have topped estimates, according to earnings tracker First Call. But even that comes with a caveat.
"It looks like we are going to beat the estimates by less than we normally do," Chuck Hill, First Call's director of Research, told CNNfn's The Money Gang. "Until we start beating them by more than we used to, there's no silver lining in these reports."
The year's six interest rate cuts by the Federal Reserve have taken the Fed's benchmark lending rate to its lowest levels since 1994. Fed Chairman Alan Greenspan this week signaled that rates could fall again next month.
Still, the effects of cheaper money take time to boost consumer and business spending. Next week, the government's broadest report on the economy should show plenty of weakness. The nation's gross domestic product is expected to have slowed to a 0.6 percent annual growth rate in the second quarter, according the economists surveyed by Reuters. That's down from 1.2 percent in the first quarter.
But the future appears brighter. The Conference Board, a private research group, this week said its index of leading economic indicators, a gauge of forward economic activity, rose for a third straight month.
This mix of good and bad has whipsawed stocks.
"It's a market of air pockets," said Peter Mancuso, NYSE trader at Performance Specialist Group. 
Click here to send mail to Staff Writer Jake Ulick
|
