U.S. stocks fall after data, Greenspan remarks
(Updates to midday)
By Haitham Haddadin
NEW YORK, May 25 (Reuters) - Stocks fell in midday trading
on Friday as new evidence of weakness in the U.S. economy,
including a slower rate of growth in the first quarter than
initially reported, raised concern that a slump in corporate
profits may be prolonged.
Wall Street was also hit by figures that showed a drop in
existing-home sales and orders for big-ticket items last month,
as well as a warning from Federal Reserve Chairman Alan
Greenspan late on Thursday that weak growth may linger on. He
also left the door open to more interest-rate cuts to counter
that possibility.
"There is a light at the end of the tunnel, but the tunnel
has just gotten longer," said Richard Babson, president of
Babson-United Investment Advisors, which manages $1.8 billion.
"The bad news is that it does not look like the economy
will get out of the box until 2002 and it will take more rate
cuts to get us there," Babson said. "The good news is that the
Fed appears to be ready and willing."
The Dow Jones industrial average <.DJI> lost 92 points, or
0.8 percent, to 11,029, as most of the 30 stocks in the
blue-chip index fell, while the broad Standard & Poor's 500
Index <.SPX> fell 11.78 points, or 0.91 percent, to 1,281.39.
The technology-laced Nasdaq Composite Index <.IXIC> was
down 25.35 points, or 1.11 percent, at 2,256.67, as Big Tech
firms eased, including Web gear giant Cisco Systems Inc.
<CSCO.O> and Oracle Corp. <ORCL.O>, the software giant.
One bright spot was the semiconductor equipment companies
after Wall Street brokerage Prudential Securities said it
upgraded the group to strong buy from accumulate, saying orders
for microchip-making machines are set for a recovery this fall.
The companies included sector giant Applied Materials <AMAT.O>,
which rose 63 cents to $55.05.
Airlines stocks slumped after Goldman Sachs cuts its 2001
earnings view for the group, citing weaker-than-expected demand
and persistently high fuel prices. Among those Continental
Airlines <CAL.N> fell 48 cents to $49.11, and American Airlines
parent, AMR Corp.'s <AMR.N> 51 cents to $37.31.
General Electric Co.<GE.N> fell $1.46 to $49.94, weighing
on the Dow. GE's finance arm and Goldman Sachs Group Inc.
<GS.N> have made a preliminary offer to take over troubled loan
provider Finova Group Inc. <FNV.N> which is in bankruptcy
protection, and provide $7 billion in financing, GE said after
Thursday's market close. Finova bolted 23 percent higher, or 45
cents to $2.38 and Goldman shed $1.16 to $98.69.
The U.S. government said Gross Domestic Product (GDP) --
the broadest measure of economic activity -- grew at 1.3
percent in the first three months of 2001, down from an initial
reading of a surprisingly strong 2 percent growth reported a
few weeks ago. Economists on average were expecting 1.5 percent
growth. This was the first revision to the quarterly GDP data.
Sales of U.S. existing homes fell 4.2 percent in April,
raising concerns the U.S. economic picture had cast a shadow
over the housing market, a realtors' group, the National
Association of Realtors, said. U.S. April sales of existing
homes fell to an annual rate of 5.20 million units from a
revised annual rate of 5.43 million in March.
This added to fears that one of the economy's most
resilient sectors may finally be slowing down, after data on
Thursday cited a sharp fall in new-home sales in April.
Also on Friday, the Commerce Department reported that new
orders for U.S. big-ticket manufactured goods plunged 5 percent
last month to $184.74 billion, after a 2.2 percent rise in
March, as demand for aircraft, cars, computers and a host of
other goods slumped. The drop in overall orders was far sharper
than the 2 percent drop economists had predicted.
"The GDP (economic) numbers put a little concern also as to
the strength of the consumer, especially on the back of lousy
housing numbers we got earlier this week," said Barry Hyman,
chief investment strategist at Ehrenkrantz King Nussbaum.
"Since (late) March the market has taken a V-shaped stance
on the hopes of a recovery but based on Greenspan's speech that
is not imminent," he said. "Of all the data we got and
Greenspan's speech, we should not expect a vigorous economic
turnaround until 2002."
Upbeat consumer sentiment data from the University of
Michigan did little to boost the market's mood. The
university's key gauge of U.S. consumer sentiment rose in May,
ending a sharp slide that began late last year. The final May
index which measures consumers' attitudes about the economy
rose to 92.0 in May from 88.4 in April, market sources said.
Economists had been expecting a reading of 92.2.
ADC Telecommunications Inc. <ADCT.O> lost $1.99 to $8.29
after the telecom equipment maker posted a quarterly loss after
one-time charges as expected, and said it expects the economic
slowdown to continue for the balance of the year.
On a brighter note, TiVo Inc. <TIVO.O> jumped $2.23 to
$10.73 on Nasdaq after it said late on Thursday that its
quarterly net loss widened while revenues jumped sharply,
driven by the addition of some 35,000 new subscribers to its
service which can pause, record and playback live television.
Lucent Technologies <LU.N>, one of the most active stocks
on the New York Stock Exchange, fell 32 cents to $9.21 amid
talk that a takeover by French rival Alcatel <CGEP.PA> <ALA.N
was imminent. Some analysts say the deal, valued at about $33
billion, offers few synergies and could spark cultural clashes.
Alcatel U.S.-listed shares fell $1.97 to $27.49.
The U.S. stock market will close on Monday for Memorial Day
holiday.
((-Wall Street Desk, Tel 646 223 6114))
REUTERS
*** end of story *** |
