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MARKET PREVIEW: Investors digest earnings, Sprint warning

It's a mixed bag for the stock market Wednesday. The good news? The Federal Reserve cut interest rates. The bad news? Investors have to sift through sluggish earnings results and a profit warning from Sprint. The Dow is set to open sharply lower.

On Tuesday, the Federal Reserve did as expected and cut interest rates by another half-point. It also signalled that there was no end in sight to its campaign to reinvigorate the slowing U.S. economy.

The aggressive move was the fifth straight interest-rate slashing this year and brought the federal funds rate, a benchmark for short-term rates throughout the economy, to 4 percent, its lowest level in seven years.

But the good news may fade quickly Wednesday as investors digest the latest batch of earnings.

Sprint (NYSE: FON), a long-distance telephone company, warned Wednesday that it anticipates second-quarter profit of 28 cents to 30 cents a share and full-year earnings of $1.13 to $1.18 a share. It was expected to earn 32 cents in the second quarter and $1.29 for the year, according to analysts surveyed by First Call.

Stocks to Watch

  • BEA Systems (Nasdaq: BEAS), a maker of electronic-commerce software, said it earned 8 cents a share in the first quarter ended April 30, excluding costs related to acquisitions and other items, topping the 7-cent average forecast by First Call.

    The company also raised its earnings outlook for fiscal 2002, citing stronger-than-expected sales in its fiscal first quarter. BEA upped its per-share earnings forecast for the year by 2 cents to a range of 41 cents to 43 cents, William Klein, BEA's chief financial officer, said during a conference call with analysts.

  • Sycamore Networks (Nasdaq: SCMR), a maker of fiber-optic equipment said it had a loss of 19 cents a share in the third quarter, ended April 28, excluding costs related to restructuring and other items. That's wider than the expected 18 cents, according to First Call. This wasn't the first bad news about its quarter--the company had already warned that it would fall woefully short of estimates and lay off 140 employees, citing slowing orders from major telecommunications customers.

  • Applied Materials (Nasdaq: AMAT) reported its second quarter and told analysts to lower their third-quarter forecasts, but the company also sees orders reviving in the second half of its fiscal year. The maker of equipment used to build semiconductors also said it earned 32 cents a share for the quarter, excluding onetime costs, a penny short of First Call's consensus estimate.

  • QLogic (Nasdaq: QLGC), a maker of components for storing information on computer networks, said it earned 28 cents a share in its fourth quarter, ended April 1, excluding certain costs. The company was expected to earn 27 cents a share, the average forecast of eight analysts surveyed by First Call.

    At the Bell

    The Dow Jones industrial average may open 76 points lower. The Standard & Poor's 500 index for June futures contracts was off 8.9 points to 1,248 at 7:15 a.m. EDT in 24-hour electronic trading.

    Reuters contributed to this report.