Tech, financial stocks fall
The resolution of the U.S. presidential election brings little joy to investors as stocks fall across the board.
Vice President Al Gore made his concession speech Wednesday night after the U.S. Supreme Court ruled Tuesday that the vote recount in Florida could not continue. The move makes Texas Gov. George W. Bush the country's 43rd president.
Although Wall Street traders for weeks have been blaming election uncertainties for the unenthusiastic markets, closure brought little relief to the continued stock decline. The Nasdaq composite index fell 94.26, or 3 percent, to 2,728.51, and the Standard & Poor's 500 index lost 19.06 to 1,340.93. The Dow Jones industrial average dropped 119.45 to 10,674.99.
"Out of the five E's, the election is over, but the markets still have the euro, energy, earnings, and the economy" to worry about, said Iyako Tsuboya, a trader at Daiwa Securities America. "The market is looking for something to make a rebound, but so far nothing is working."
Many analysts blamed the slump on the prospect of earnings warnings, particularly in the technology sector. Apple Computer, Compaq Computer, Gateway, Intel, Motorola and 3Com have all warned of earnings shortfalls for their current quarters.
Preannouncement jitters became more acute Thursday, when software giant Microsoft warned that earnings for its 2001 fiscal second quarter would be 5 percent to 6 percent lower than expected--in the $6.4 billion to $6.5 billion range. The company said earnings per share would fall in the range of 46 cents to 47 cents.
Tony Cecin, head of trading at U.S. Bancorp Piper Jaffray, said that traders were hopeful that the presidential election decision would spark a rally, but the storm of warnings overshadowed good news on the political front.
"If there hadn't been more ugly earnings news this week, there would have been a more (positive) reaction," Cecin said. "People now have to hunker down and figure out where they are going to put their money in 2001 because there are no more distractions."
About 13 stocks fell for every six that rose on the Nasdaq, which posted a volume of 1.76 billion shares. The New York Stock Exchange generated a moderate volume of 1.04 billion shares as 17 stocks declined for every 12 advancers.
Merger partners J.P. Morgan and Chase Manhattan announced that earnings for the fourth quarter would be lower than expected. J.P. Morgan closed down $6.31 at $157.94, while Chase lost $1.63 to $42.88.
Other merger partners managed to trade higher after some positive news. The Federal Trade Commission voted unanimously Thursday to approve the merger between America Online and Time Warner.
The vote means AOL and Time Warner now have to face the Federal Communications Commission before their deal officially closes, although approval is widely expected. AOL rose $1.55 to $50, while Time Warner gained $1.90 to $74.50.
The CNET tech index fell 31.28 to 2,305.11. Losers topped winners, with 71 of the 97 stocks in the index falling, 23 rising and three remaining unchanged.
Investors received some good economic news. The Producer Price Index, a measure of inflation at the wholesale level, inched up 0.1 percent in November after rising a seasonally adjusted 0.4 percent in October.
Excluding the more volatile food and energy sectors, the Labor Department reported wholesale prices remained unchanged in November compared with October's 0.1 percent drop. The data suggest that inflation remains under control, increasing the chance the Federal Reserve could cut interest rates next year.
Of the 18 sectors tracked by CNET Investor, Internet services companies and Internet e-tailers posted the sharpest drops, falling 4 percent each. Internet content providers were the day's only gainers, climbing 0.58 percent.
Despite the lackluster telecom sector, some optical equipment companies had good earnings news. Corning reaffirmed its fourth-quarter and full-year earnings forecasts Thursday. The company expects fourth-quarter pro forma earnings between 26 cents and 28 cents and $1.15 to $1.17 for the year. The maker of fiber-optic cable rose as high as $76.44 before closing down $2.50 at $70.
Nortel Networks reassured investors Thursday that it will meet expectations for the full year and fourth quarter, as well as for the first quarter of 2001. The telecommunications equipment maker rose $2.31 to $38.75.
Verity also joined in the earnings party, rising $3.88, or about 21 percent, to $22.44. The company reported earnings of 23 cents a share compared with analysts' expectations of 20 cents a share, according to First Call/Thomson Financial. Verity makes search and retrieval software for Web sites.
Shares of Adobe Systems hit a speed bump, falling $8.88, or 13 percent, to $57.31. Morgan Stanley Dean Witter analyst Rebecca Runkle downgraded the graphics software company to "neutral" from "outperform," blaming the economic slowdown and valuation concerns rather than internal problems at the company.
Adobe is expected to report earnings after the markets close Thursday. Consensus estimates call for earnings of 29 cents per share.
Chip stocks closed down. The Philadelphia semiconductor index slipped 6.14 to 592.58, led by equipment maker Applied Materials, which fell $2.31 to $40.38.