Nasdaq's cold winter
But the Dow industrials end Feb. strong, staying higher on the year.
February 28, 2002: 4:47 p.m. ET
By Staff Writer Jake Ulick
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NEW YORK (CNN/Money) - Disappointing outlooks from a handful of technology companies sent the Nasdaq composite index lower Thursday as the index suffered its worst monthly loss since September.
But the Dow Jones industrial average capped a solid February as investors encouraged by stronger-than-expected economic data bought time-tested companies with predictable profits.
The Nasdaq slipped 20.36 points, or 1.2 percent, to 1,731.52, falling more than 10.5 percent on the month. But the Dow Jones industrial average ended with a 1.9 percent February gain, as Enron's bankruptcy whetted the appetite for safety.
The Dow shed 21.45 to 10,106.1 Thursday while the Standard & Poor's 500 index slipped 3.16 to 1,106.73, down 2 percent on the month.
Analysts, raising questions about the vigor and timing of the rebound in corporate profits, are cautious about stocks in the weeks ahead.
"Traders and investors feel more comfortable with the value sector of the market," said Alan Ackerman, market strategist at Fahnestock & Co. "What we're seeing is a two-tiered market."
Ackerman links the recent flight to safety to Enron, whose bankruptcy set off worries that other companies overstated profits and hid losses. Gold prices soared to a two-year high above $300 this month as investors scrambled for solid assets.
"This market may not break out of that range," Brian Finnerty, head of Nasdaq trading at C.E. Unterberg Towbin, told CNNfn's The Money Gang.
Thursday's economic data pointed to stability. The government upwardly revised the nation's annual growth rate to 1.4 percent for the fourth quarter. And an index on Midwest-area manufacturing activity showed surprising strength.
Market breadth was mixed. On the New York Stock Exchange, advancers topped decliners 8-to-7 as 1.3 billion shares traded. Nasdaq losers topped winners 5-to-4 as 1.9 billion shares changed hands.
In other markets, Treasury securities declined. The dollar fell against the yen and euro.
GDP a surprise
The GDP number, above forecasts, signaled the recession may be mild and short-lived.
"It's just a confirmation of a fairly positive trend for the U.S. economy and for the stock market," said Patrizio Merciai, chief strategist at Lombard Odier, which has about $60 billion under management.
While Merciai expects a shallow recession as falling inventories presage a pickup in production, he said consumer confidence is vulnerable, particularly amid an uncertain job market.
The number of Americans filing for first-time jobless claims rose by 17,000 to 378,000 last week, the government said, while the four-week moving average of claims fell to its lowest levels since August.
In other economic data, the National Association of Purchasing Management-Chicago said its index of regional factory activity rose to 53.1 in February, stronger than expected.
The figures came a day after Federal Reserve Chairman Alan Greenspan forecast a modest recovery. But stocks were unable to hold a rally that day as investors fretted about the strength and pace of the rebound.
Those worries persisted. Disney (DIS: down $1.25 to $23.00, Research, Estimates), one of the Dow's biggest decliners, suffered after Goldman Sachs said the media company's fiscal second-quarter profit could miss forecasts by a wide mark.
The second biggest loser on the NYSE, PC maker Gateway (GTW: down $0.50 to $4.60, Research, Estimates), warned of a wider-than-expected loss for the current quarter and said it doesn't expect to be profitable until 2003.
At least three brokerage firms cut their ratings on Genesis Microchip (GNSS: down $17.51 to $23.49, Research, Estimates) after the chipmaker served up a disappointing financial outlook.
And Nasdaq's biggest loser, Riverstone (RSTN: down $3.77 to $3.82, Research, Estimates), a maker of networking equipment, warned it will miss fourth-quarter profit forecasts amid the slump in the telecom market.
Cisco Systems (CSCO: up $0.03 to $14.27, Research, Estimates) recovered a fraction of Wednesday's 8 percent tumble that came after a brokerage cut the communication equipment maker's profit targets.
But the Dow's biggest gainers, Honeywell (HON: up $0.97 to $38.12, Research, Estimates), Citigroup (C: up $1.01 to $45.25, Research, Estimates) and Johnson & Johnson (JNJ: up $0.67 to $60.90, Research, Estimates) kept the Dow industrials higher on the year.
No. 3 U.S. retailer Target (TGT: down $2.00 to $41.90, Research, Estimates) reported a fourth-quarter profit of 73 cents per share Thursday that topped estimates by a penny.
Another retailer, Limited (LTD: down $0.28 to $18.01, Research, Estimates), said fourth-quarter profit came in at $326.5 million, or 75 cents a share, up from $242.6 million, or 55 cents per share, a year earlier.
Jewelry merchant Tiffany (TIF: down $2.22 to $32.81, Research, Estimates) said it earned 58 cents in its fourth quarter, topping forecasts and year-earlier figures, but sales came in lower than expected.
The day's action narrowed the Dow industrials' 2002 gain to 0.9 percent, but widened the Nasdaq's losses to 11.2 percent on the year. February's losses were the worst since September, when the Nasdaq fell 17 percent.
Gail Dudack, chief investment strategist at SunGuard Institutional Brokerage, expects more challenges ahead.
"Profits are going to rebound, but much slower than people hope for," Dudack told CNNfn's Before Hours. She expects the major indexes to retest the three-year lows hit on Sept. 21, the first week after market opened following the terrorist attacks. 
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