NEWS--Stocks Seen Slammed at Start of Trading
By Denise Duclaux
NEW YORK (Reuters) - U.S. stocks were expected to crater at the start of trading on Friday as Intel Corp.'s warning about weak revenue growth cast a long shadow over Wall Street--already sparking sell-offs in overseas markets and wide declines in U.S. pre-open trade.
``We will set the Olympic record for nail biting today,'' said Larry Wachtel of Prudential Securities.
When Intel (NasdaqNM:INTC - news) warned late Thursday that revenues would miss company forecasts, it reinforced a persistent theme as the third quarter ends that weak corporate results will weigh on the markets.
Fears that earnings would take a beating with sky-high oil prices and an anemic euro have already plagued the markets.
Intel's news pushed its stock down more than 20 percent in pre-market trading, dragged down other U.S. technology stocks and weighed on European and Asian markets.
As one of the 30 Dow Jones Industrial average components and a heavily-weighted element of the Nasdaq composite, Intel's potential freefall during regular trade will have a devastating effect on both market barometers.
``The company was saying until recently that everything was fine, so psychologically this is a tremendous shock,'' said David Donnelly, a hedge fund manager with London-based Gordon House Asset Management. ``It feels like walking onto a stage and falling through a trap door. I'm sure a lot of people have been hurt badly.''
With more than an hour to go before the open, Nasdaq index futures tumbled 92.00 points, or ``limit down,'' to 3,673.00. The limit is in effect on the Globex trading system, meaning that Nasdaq futures cannot trade below that point before the open. Meanwhile, S&P index futures sagged 24.70 points to 1,448.80.
The computer chip bellwether, blaming weak European demand for its microprocessors, warned that third-quarter revenues will fall below forecasts. Intel predicted a rise of only about 3 percent to 5 percent from second-quarter sales of $8.3 billion.
Intel's warning follows recent speculation that global demand for microprocessors and personal computers is waning.
``There are so many questions involved--specifically, is this specific to Intel?,'' Wachtel said. ``But I know some money managers who are waiting for opportunities. If people sell indiscriminately away from Intel, they will buy those stocks.
On Thursday, both semiconductor and telecom shares helped to drag the technology-packed Nasdaq Composite Index (^IXIC - news) down 68.56 points, or 1.76 percent, to 3,828.87.
Meanwhile, a late bout of buying pushed the Dow Jones industrial average (^DJI - news) up 77.60 points, or 0.73 percent, to 10,765.52. The gains followed a six-session string of losses.
But market breadth was negative due to lingering concerns that record-high oil prices and the weakness of the euro, Europe's single currency, would eat into the profits of U.S. multinational companies.
Oil prices eased further after a heavy fall on Thursday when Democratic presidential nominee Al Gore (news - web sites) called for the Clinton administration to release oil from the nation's Strategic Petroleum Reserve (SPR) to ensure fuel supplies for the winter.
But dealers said that with U.S. refineries already running near full stretch trying to refill low heating oil and diesel inventories, extra crude from the SPR would not necessarily help push prices much lower.
Meanwhile, central banks from Europe, Japan and the United States stepped into foreign exchange markets on Friday to defend the battered euro on the eve of a top-level meeting from the Group of Seven industrialized countries.
The intervention, the first joint central bank action since 1995, drove the euro up sharply, although the currency later gave up some of these gains as financial markets fought back.
The euro's low point of below $0.85, reached earlier this week, was almost 30 percent below its level to the dollar at the launch. |
