graphic
graphic  
graphic
Markets & Stocks
graphic
U.S. stocks sell off
graphic December 13, 2001: 5:14 p.m. ET

Earnings warnings, poor retail sales data worry Wall St.
graphic
graphic graphic
graphic
NEW YORK (CNN/Money) - U.S. stocks fell on Thursday when confronted with evidence that the economy was not yet fully in recovery mode, if at all.

The bad news included profit warnings from telecommunications companies Lucent Technologies and Ciena and a weaker-than-expected November retail sales report from the U.S. Commerce Department.

With its recent rally, the market has been saying it believes the economy is warming up and that corporate cost-cutting will soon have a positive effect on earnings, said Dave Herron, Head of Listed Trading at Charles Schwab. "But we still haven't seen real signs of things getting better yet."

After the bell, software maker Oracle (ORCL: Research, Estimates) announced fiscal second-quarter earnings of 10 cents a share, down from the year-earlier quarter's 11 cents a share but meeting recently lowered estimates.

The indexes were lower for most of the day and extended their losses in the last two hours of trading.

On top of the worrisome economic news, the minutes of the Federal Reserve's Nov. 6 meeting were released Thursday afternoon and gave the stock market more to worry about. The minutes indicated that some members of the Federal Open Market committee, the Fed's interest-rate-setting body, favored a one-quarter percentage-point cut over the half-point cut that was made because they were worried that the larger cut would build in "inappropriate expectations for further cuts.

The last thing the market needed to worry about any hint of a potential end to interest-rate cuts, especially coming on top of the negative earnings and retail sales news, said Bernie Schaeffer, chairman of Schaeffer's Investment Research. "I think that was kind of a tough double-dose," he said.

The Nasdaq composite index fell 64.87 points to 1,946.51, while the Dow Jones industrial average fell 128.36 points to 9,766.45 and the Standard & Poor's 500 index fell 17.69 to 1,119.38. On a percentage basis, the Nasdaq gave up about twice as much as the other two indexes.

"Given the rally it's had since the 17th, it really isn't much," Herron said.

Market breadth was broadly negative on active volume. On the Nasdaq, declines topped advances by a margin of about 2-to-1 as 2.0 billion shares traded. The New York Stock Exchange losers surpassed winners by about 2-to-1 with 1.4 billion shares changing hands.

Traders also were riveted for the better part of an hour Thursday morning to a videotape of Osama bin Laden cheering the Sept. 11 terrorist attacks. But traders said the airing of the tape, which had been expected and whose contents the U.S. government had outlined in recent days, didn't appear to influence the market's direction.

"I think you're looking at a very unsettled situation now," Jeffrey Benton, specialist for Performance Specialist Group, told CNNfn's Market Call.  "What's going on in the Middle East is cause for great concern."

Asian stock markets finished Thursday broadly lower, while European markets ended lower on weakness in technology and media issues. Treasury prices fell, ending a three-day rally. The dollar was slightly stronger against the euro and yen. Light crude oil futures slipped 29 cents to $18.53 a barrel in New York.

Lucent disconnected

Since January 2000, Lucent (LU: down $1.21 to $6.52, Research, Estimates) has been scaring off investors with dismal forecasts about revenue and the bottom line, and Thursday it produced another of those warnings. The company said its loss for the fiscal first quarter ending this month would be wider than expected on sales that would fall from the previous quarter.

The miseries in the telecom sector also were reflected in Ciena (CIEN: down $3.03 to $14.94, Research, Estimates), which warned late Wednesday of future operating losses after posting fiscal fourth-quarter operating earnings in line with estimates. And telephone service provider Qwest Communications (Q: down $0.30 to $11.80, Research, Estimates)  warned of 2002 earnings below expectations and an additional 7,000 job cuts.

"They [Lucent] gave us some pretty negative guidance this morning about how they didn't think they'd be profitable until 2003 at the earliest," Ted Weisberg, trader at Seaport Securities, told CNNfn's Halftime Report. "I think it put a big lid on a lot of the positive activity we've seen in the tech sector."

Qwest was just one of several big companies reporting job cuts, muting any positive effect from a government report of a sharp drop in initial jobless claims last week.

Aerospace manufacturer Boeing (BA: up $0.20 to $37.00, Research, Estimates) joined the list with word that it is cutting between 1,000 and 1,500 jobs at a Pennsylvania facility.

Insurer Aetna (AET: down $0.30 to $30.74, Research, Estimates) said it would cut 6,000 jobs, financial services provider American Express (AXP: down $0.82 to $32.60, Research, Estimates) said it is reducing its work force by 6,500, and semiconductor equipment maker Applied Materials (AMAT: down $3.79 to $41.08, Research, Estimates) revealed a reduction of 1,700 positions.

The news from Applied Materials affected semiconductor makers, with Intel (INTC: down $1.51 to $32.57, Research, Estimates) and Advanced Micro Devices (AMD: down $2.13 to $16.18, Research, Estimates) both sharply lower. AMD wasn't helped by a Prudential downgrade to "sell" from "hold."

Instability in the economy

Commerce's retail sales report showed a sharp drop in November sales. The drop reflected the end of the zero-percent financing offered by carmakers in the wake of the Sept. 11 terrorist attacks. The government said sales dropped 3.7 percent, although without cars taken into account the decline was 0.5 percent. Economists were expecting a 3.1 percent drop.

"I think a lot of people are looking for some positive signs coming out of the economy," Seaport's Weisberg said. "So therefore any data that doesn't support that wish is going to put a blanket on things."

Inflation remained well-tamed. The government said producer prices fell 0.6 percent in November, although they were up 0.2 percent excluding food and energy costs.

United Technologies (UTX: up $1.15 to $60.65, Research, Estimates) was a bright spot among the generally lower Dow issues. The industrial conglomerate said it would meet lowered fourth-quarter earnings estimates and surpass forecasts for 2002. Rival General Electric (GE: unchanged at $37.05, Research, Estimates) also was a Dow gainer.

HotJobs.com (HOTJ: up $3.83 to $10.30, Research, Estimates)  shares rallied on news that Internet portal Yahoo! (YHOO: down $1.56 to $17.58, Research, Estimates) has offered $436 million for the online job search company. The bid competes with one from TMP Worldwide (TMPW: down $3.28 to $41.77, Research, Estimates), the parent of HotJobs' rival, Monster.com.

On the positive side, shares of insurer Prudential Financial (PRU: up $1.80 to $29.30, Research, Estimates) rose on their first day of trading. Prudential's initial public offering of 110 million shares were priced at $27.50 each on Wednesday, raising $3 billion.

graphic  
With the telecom warnings and job cuts, many market participants seemed to be feeling bearish about the market's direction, at least in the short term. Going into Thursday's session, the Nasdaq had risen 41 percent and the Dow had gained 20 percent since Sept. 21 - the end of the first week of trading following the Sept. 11 attacks.

"I think it (Lucent's warning) was sort of a wake-up call for a lot of people who had gotten re-excited and refocused with the tech stocks," Weisberg said. graphic

Click here to send mail to Victoria Zunitch





graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

graphic