Wall St. can't break out
February 6, 2002: 5:11 p.m. ET
U.S. stocks cling to recent declines, despite news out of Tyco and Cisco.
By Staff Writer Alexandra Twin
NEW YORK (CNN/Money) - Wall Street failed to snap its recent losing streak Wednesday, as some reassurance from beleaguered Tyco International helped blue chip buyers but did little to distract sulky tech investors, shaken by losses in the telecom and networking sectors.|
The Nasdaq composite closed down 25.81 to 1,812.71; it was the fourth straight decline for the index. The Dow Jones industrial average fell 32.04 to 9,653.39. The Standard & Poor's 500 gave back 6.51 to end the day at 1,083.51.
Tyco (TYC: up $2.82 to $25.92, Research, Estimates) Chairman Dennis Kozlowski offered analysts a mixed picture during a conference call, saying the conglomerate may miss current 2002 estimates, but that its much-discussed accounting is in good health.
"More and more companies are going to be scrutinized in the coming months, but despite all this gloom and doom, the market is holding up pretty well with a few notable exceptions, like WorldCom," said Matt Ruane, director of listed trading at Gerard Klauer Mattison.
WorldCom, another company whose accounting has been questioned, kept the pressure on the hard-hit telecommunications sector, while Sun Microsystems flailed on a number of concerns, including negative analyst commentary.
"There are some gradual signs that the worst is over for this particular downdraft," David Briggs, head of equity trading at Federated Investors told CNNfn's Street Sweep. "We're optimistic that we can get a little turnaround by the end of the week. But it's hard to point to any one real catalyst that can turn things around."
Asian stocks finished lower Wednesday and banking stocks pushed European bourses lower by the close.
Treasury prices were lower, with the 10-year note yield closing up to 4.94 percent from 4.89 percent late Tuesday. The dollar was stronger versus the euro and little changed versus the yen. Light crude oil futures rose 16 cents to $20.23 a barrel in New York. In Chicago, gold futures fell 70 cents to $298.30 an ounce.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers almost 5-to-3 as 1.65 billion shares changed hands. On the Nasdaq, losers topped advancers by almost 2-to-1 as 2.06 billion shares traded.
Sun hangs back; Tyco thrives
Conglomerate Tyco may miss current full-year estimates of $3.70 a share by as much as 40 cents due to higher borrowing costs, weakness in its electronics unit, and the recent selling spree on the accounting rumors, the company said in its conference call.
However, CEO Kozlowski said all questions about accounting have been raised and refuted before, but that to back this up the company will put in verification of sound accounting in a filing available publicly.
In addition, Tyco will have a weekly conference call for analysts and investors to keep them informed -- attempting, some analysts said, to take what is clearly a different path than bankrupt energy firm Enron, which kept investors in the dark throughout its troubles.
"There's still a lot of non-believers out there about Tyco. This is not good news," said Matt Ruane, head of Nasdaq trading at Gerald Klauer Mattison.
Enterasys (ETS: up $0.93 to $4.93, Research, Estimates) and Elan (ELN: up $0.01 to $14.00, Research, Estimates) also are names for whom the dreaded "A" word, accounting, has been bandied about in the last few sessions, and the stocks have suffered as a result. Those stocks saw a turnaround Wednesday, but VeriSign (VRSN: down $2.52 to $23.93, Research, Estimates), a provider of computer security and Web addresses, was heavily pummeled on rumors of accounting irregularities.
Concerns about liquidity and debt repayment continued to burn WorldCom (WCOM: down $0.28 to $6.69, Research, Estimates). But another recent depleted telecom, wireless company Nextel (NXTL: up $0.97 to $6.02, Research, Estimates), saw a bit of a turnaround. The company said Tuesday that it has added 501,000 new net subscribers and that this should bring it $540 million in operating cash flow for its fourth quarter.
Dow component and No. 2 local phone service provider SBC Communications (SBC: down $1.52 to $34.49, Research, Estimates) fell with the sector.
A New York Times article Wednesday said that SBC and No. 1 local phone service provider Verizon Communications (VZ: down $1.61 to $43.40, Research, Estimates) had both considered making buy offers for WorldCom last year but had opted not to.
Also on the Dow, Citigroup (C: down $0.80 to $44.00, Research, Estimates) and American Express (AXP: down $1.60 to $32.90, Research, Estimates) both fell. The overall telecom news may be affecting some financials that could be at risk if the companies can't repay debt, analysts said.
Sun Microsystems (SUNW: down $0.57 to $9.58, Research, Estimates) fell back in active trade on its analyst day. The CEO of the largest maker of Unix servers that power corporate networks and Web sites late Tuesday reiterated guidance of a return to profitability by its June quarter.
But Salomon Smith Barney initiated coverage of the largest maker of Unix servers with a "neutral," while Wit Soundview cut its current quarter estimates on the stock, saying post-holiday season demand is not picking up as quickly as was expected.
ImClone Systems (IMCL: down $1.53 to $15.45, Research, Estimates) declined anew in afternoon trade following a Tuesday demand from Bristol-Meyers Squibb (BMY: down $0.90 to $42.80, Research, Estimates) that it hand over control of its regulatory approval for cancer drug Erbitux and replace its CEO and chief financial officer. The company said it will abandon its marketing and development deal with the company if it does not do this.
Cisco Systems (CSCO: up $0.11 to $18.61, Research, Estimates) said before the market opened that it beat analysts' consensus in terms of both earnings per share and revenue for its fiscal second quarter, although the news failed to inspire investors.
The network equipment maker said it had offered the partial news ahead of its scheduled close due to an internal error that resulted in the information being released to a large number of employees ahead of the investing public.
Once markets closed, the network equipment maker said more specifically that it had earned nine cents a share, topping estimates of five cents a share, but showing a decline from the 18 cents a share earned in the year-ago period.
Analysts had been expecting a decline in profit to 5 cents a share from the 18 cents earned a year earlier, while revenue was expected to fall to $4.5 billion from $6.7 billion.
PepsiCo (PEP: down $1.71 to $49.10, Research, Estimates) posted fourth-quarter results of 42 cents a share that met expectations and improved on the 36 cents a share earned one year earlier.
In government economic data released Wednesday, fourth-quarter productivity rose 3.5 percent, topping forecasts. Labor costs fell in the latest sign that inflation is not a problem.
"We're in a bit of a downtrend right now. There's a bit of a negative pattern technically and fundamentally. But we rarely follow through on these dips downward," said John Hughes, market analyst at Shields & Co. "This is a constructive process we're going through as we're working things out. It's a positive thing."