U.S. stocks fall in Nasdaq's worst week of 2001
Reuters, 06.15.01, 5:00 PM ET
By Haitham Haddadin
NEW YORK, June 15 (Reuters) - Stocks fell on Friday, with the Nasdaq market registering its biggest weekly loss this year on a steady stream of grim profit forecasts from high-technology companies.
Telecommunications equipment maker Nortel Networks Corp. <NT.TO> (nyse: NT - news - people), and JDS Uniphase Corp. <JDU.TO> (nasdaq: JDSU - news - people), the fiber-optics parts supplier, both warned of disappointing results amid the slowing U.S. economy. The warning, coupled, with fresh government data showing a deteriorating economy, sent major market indices to seven-week lows.
"Those are the super-hot groups that are now a disaster," said Scott Bleier, chief investment strategist at Prime Charter Ltd. "The stock market took these companies to so many billions of dollars in market value that it would take a miracle to justify their valuations."
So far this quarter, 498 companies have said their earnings would fall short of expectations -- a five-fold increase from a year ago. Some 132 have said they would be on target and 138 said results would be better than expected, according to market research firm Thomson Financial/First Call.
Even blue-chip companies like fast-food chain McDonald's Corp. (nyse: MCD - news - people) on Friday joined the chorus of warnings, putting a damper on the Dow Jones industrial average <.DJI>
The Dow lost 66.49 points, or 0.62 percent, to 10,623.64. The broader Standard & Poor's 500 Index <.SPX> edged down 5.51 points, or 0.45 percent, to 1,214.36.
The tech-laced Nasdaq Composite Index <.IXIC> slipped 15.64 points, or 0.77 percent, to 2,028.43.
Nasdaq, which had sunk below the key 2,000-point level with a fall of more than 2 percent earlier, had its sixth straight down session. The Nasdaq fell 8.4 percent for the week, its biggest weekly decline this year. The Dow was off 3.2 percent and the S&P down 4 percent from last Friday's close.
"Triple witching," the simultaneous expiration of stock-index futures, stock-index options and stock options, exaggerated price swings in the market and also increased trading volume, which have been slack recently.
The indexes lifted off earlier lows as Wall Street clung to hopes the Federal Reserve will deliver another deep interest-rate cut later this month to prop up the economy.
"I am impressed by the resiliency in the market, but I am still trading cautiously," said Donna Van Vlack, director of trading at Brandywine Asset Management, which oversees $7 billion. "The world is still pretty darn soggy, and you have to be very careful and methodical in how you do anything here."
Nortel dropped 74 cents to $9.86, cutting some of its losses. The company announced new job cuts and predicted a big second-quarter loss as customers cut back significantly on purchases of telecommunications equipment.
JDS sank $1.37 to $12.44 after warning late Thursday of an unexpected loss on weak revenues in the telecommunications spending slump. JDS shares, among the most active on Nasdaq, had earlier sunk to a fresh 52-week low at $10.81.
The companies' gloomy news cast a pall over telecommunications gear and networking stocks. Ciena Corp. (nasdaq: CIEN - news - people), which makes gear that boosts the capacity of fiber-optic networks, lost $4.53 to $40.14. Telecommunications equipment maker Lucent Technologies Inc. (nyse: LU - news - people) fell 44 cents to $6.31. Cisco Systems Inc. (nasdaq: CSCO - news - people), the top Web gear maker, shed $1.09 to $16.65.
A bright spot was Adobe Systems Inc . (nasdaq: ADBE - news - people), up 55 cents at $39.56. The publishing software maker reported earnings and sales that beat expectations.
Software giant Microsoft Corp. (nasdaq: MSFT - news - people), rocked by rumors that it could issue a profit warning, dropped 88 cents to $68.02, weighing on the Dow and the Nasdaq. A spokesman said the company does not comment on rumors or speculation.
McDonald's, the world's largest restaurant company, fell $1.29 to $28.67. The fast-food giant, hurt by a strong U.S. dollar and concerns over mad cow disease in Europe, forecast earnings below Wall Street's expectations.
Procter & Gamble Co. (nyse: PG - news - people), another Dow stock, dropped $2.26 to $62.60 after it expected growth will be below long-term goals as its baby-care, feminine-care and western European businesses lag.
The Fed said U.S. factories, mines and utilities operated in May at their slowest pace in more than 17 years, reflecting the weakness in the factory sector. U.S. industrial capacity in use fell to 77.4 percent, the lowest since August 1983, when it was at 77.0 percent, the Fed said.
A closely watched barometer of consumer sentiment showed Americans felt slightly less confident about the outlook for the economy in early June, suggesting that moderating consumer spending may not head back to robust growth any time soon. The University of Michigan's preliminary June consumer sentiment index fell to 91.6 from 92.0 in May, market sources said.
The Labor Department reported the U.S. Consumer Price Index (CPI) rose 0.4 percent in May, following a 0.3 percent gain in April. Core CPI, excluding volatile food and energy prices, rose only 0.1 percent after a 0.2 percent gain in April.
REUTERS
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