Stocks Fall Amid Doubts About Recovery
{{#rendered}} {{/rendered}}Stocks fell Friday, closing their worst week since the immediate aftermath of Sept. 11, as a mix of dreary forecasts and mediocre earnings smashed hopes of a quick turnaround in corporate profits.
The Dow Jones industrial average surrendered 124.34 points, or 1.24 percent, to 9,910.72, according to the latest available figures. It was the first close below 10,000 since Feb. 22, and only three of the 30 Dow components finished higher.
The technology-loaded Nasdaq Composite Index skidded 49.81 points, or 2.91 percent, to 1,663.89. The broad Standard & Poor's 500 Index lost 15.16 points, or 1.39 percent, to 1,076.32.
{{#rendered}} {{/rendered}}For the week, the Dow lost 3.4 percent, the Nasdaq 7.4 percent and the S&P 4.3 percent -- the worst weekly losses since the market reopened in the wake of the Sept. 11 attacks that flattened the World Trade Center.
"I just don't see where you're going to have (earnings) comparisons that are going to be very favorable going down the road," said Ned Collins, head of trading at Daiwa Securities America. "There's still some more pain to go through."
A surge in U.S. economic growth failed to keep the blue-chip Dow from ending below the key 10,000 mark. The economy grew in the first quarter at its fastest rate in more than two years, the government said, but inventory restocking boosted the number and analysts doubt that stellar clip can be sustained. Those concerns gained traction after the University of Michigan reported consumer sentiment weakened in April.
{{#rendered}} {{/rendered}}"You get this impression the second quarter is going to be a lot less robust," said Henry Herrmann, chief investment officer at Waddell & Reed, which oversees $32 billion. "The accounting mess is still out there haunting us ... and there's just no pop in earnings."
Investors, battered by weeks of selling, sought cover in safe havens like gold stocks and U.S. Treasuries.
Some analysts warned of more selling as sentiment sours, with the Dow sitting below the 10,000 level, but others said days of selloffs could prime the market for an upward move.
{{#rendered}} {{/rendered}}"The markets are getting oversold, so it is susceptible to good news," said A.C. Moore, chief investment strategist at Dunvegan Associates.
The S&P 500 has endured five losing weeks out of the past six. Earnings have landed in line with lowered expectations as Wall Street wraps up the busiest week of the reporting season, but cautious forecasts have disappointed investors.
"This is a market that is trying to find its footing," said Stanley Nabi, managing director at Credit Suisse Asset Management, which oversees about $269 billion worldwide. "What is pulling the averages down is, by and large, technology and telecom. Their earnings were worse in the first quarter than was expected when the year opened."
{{#rendered}} {{/rendered}}JDS Uniphase (JDSU) fell 50 cents, or almost 10 percent, to $4.53. The fiber-optics gear maker posted a fiscal third-quarter net loss of $4.3 billion, cut another 2,000 jobs and said it sees a wider fourth-quarter loss than anticipated by Wall Street.
Computer security and Web address company VeriSign Inc. (VRSN) tumbled $8.35, or nearly 46 percent, to $9.89, ranking among the Nasdaq's most active stocks and one of its biggest percentage losers. The company posted first-quarter revenue below estimates, lowered its guidance for the second quarter and said it would lay off 10 percent of its work force.
Dynegy Corp. (DYN) sank $4.31, or 22 percent, to $14.90 after J.P. Morgan and Salomon Smith Barney both cut their ratings on the stock. It plunged on Thursday after revealing U.S. securities regulators are probing one of its natural gas supply deals and said it would post a first-quarter loss due to charges at its telecommunications unit.
{{#rendered}} {{/rendered}}The Walt Disney Co. (DIS) weighed on the Dow with a drop of 90 cents to $24.10. The entertainment giant posted earnings in line with estimates, but some analysts expressed caution, given the weak performance of its ABC television network.
Veeco Instruments Inc. (VECO) slumped $2.44, or 7.6 percent, to $29.50, after its order growth rate slowed in the first quarter, tempering hopes for improvement in the ailing industry. The Philadelphia Stock Exchange's semiconductor index fell 4.43 percent.
General Mills Inc. (GIS) dropped $2.37, or 5 percent, to $42.93. The cereal maker cut its outlook for the 2002 fourth quarter and 2003 fiscal year earnings, as difficulties integrating its buy of Pillsbury led to lower sales volumes.
{{#rendered}} {{/rendered}}Tyco International Inc. (TYC), the most active on the New York Stock Exchange, slipped 85 cents, or 4 percent, to $19.90 after dropping to a 5-year low at $18.30. On Thursday, Tyco abandoned a sweeping plan to split into four companies, saying it was a mistake, and posted a hefty loss.
Cellegy Pharmaceuticals Inc. (CLGY) plunged $3.70, or 56 percent, to $2.90 after it said it has withdrawn the New Drug Application for its Cellegesic pain ointment.
One bright spot was Internet advertising company Overture Services Inc. (OVER) , which reported a sharp increase in earnings and sales, and announced a three-year extension of a key partnership with Yahoo! Inc. (YHOO) . Overture helped out the market with a gain of $8.14, or 31.8 percent, to $33.77.
{{#rendered}} {{/rendered}}U.S. gross domestic product, measuring the value of goods and services produced within American borders, raced ahead at an annual rate of 5.8 percent in the first three months of this year -- a full percentage point higher than the forecasts of private economists.
A big driving force behind GDP strength was an "inventory swing" that occurred as businesses, which had worked to empty their shelves last year, relied much less heavily on existing inventories to meet demand for their products.
The final April sentiment reading from the University of Michigan reading dipped to 93 in the latest month from 95.7 in March as a sluggish stock market and conflict in the Middle East weighed on Americans' mood.
{{#rendered}} {{/rendered}}Support -- where buyers are expected to swoop in -- is at 1,650 for the Nasdaq, 9,880 for the Dow and 1,060 for the S&P. Resistance -- the point where sellers are likely to emerge -- is at 1,725 for the Nasdaq, 10,000 for the Dow and 1,095 for the S&P, according to research firm Schaeffersresearch.com. The levels are key elements of technical analysis, which studies prices, volume and charts.
Declining stocks outnumbered advancers by a ratio of 3 to 2 on the New York Stock Exchange and about 2 to 1 on the Nasdaq. More than 1.37 billion shares changed hands on the Big Board and more than 1.88 billion on Nasdaq in active trading.
The Russell 2000 index dropped 7.35 to 501.50.
{{#rendered}} {{/rendered}}Overseas, Japan's Nikkei stock average fell 0.9 percent. In Europe, Germany's DAX index slipped 1.1 percent, Britain's FT-SE 100 lost 0.7 percent, and France's CAC-40 dropped 0.1 percent.
Reuters and the Associated Press contributed to this report.