Nasdaq Tumbles on Profit Concern; Exxon-Mobil, Coke Boost Dow
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Top Financial News
Thu, 27 Jul 2000, 5:31pm EDT
Nasdaq Tumbles on Profit Concern; Exxon-Mobil, Coke Boost Dow
By Stephen Cohen
New York, July 27 (Bloomberg) -- The Nasdaq Composite Index tumbled to its biggest loss in two months as technology companies including WorldCom Inc. forecast slowing sales or profit growth in the second half of the year.
Nokia Corp. lost more than a quarter of its value after saying third-quarter earnings will fall from the second. Nortel Networks Corp. slipped after Corning Inc. ended talks to buy Nortel's fiber-optics parts unit in a transaction worth as much as $100 billion.
The Dow Jones Industrial Average rose as investors scooped up shares of companies with steady profit growth, including Exxon Mobil Corp., Coca-Cola Co. and Johnson & Johnson.
``People are bailing'' out of technology stocks ''as fast as they can,'' said Donna Van Vlack, head trader at Brandywine Asset Management in Wilmington, Delaware.
The Nasdaq fell 145.49, or 3.7 percent, to 3842.23, its biggest drop since May 23. JDS Uniphase Corp. led the decline. The Standard & Poor's 500 Index lost 2.80, or 0.2 percent, to 1449.62. The Dow rose 69.65, or 0.7 percent, to 10,586.13.
Twelve stocks fell for every 11 that rose on the New York Stock Exchange. Some 1.1 billion shares changed hands on the Big Board, 21 percent more than the three-month daily average.
The Nasdaq has fallen in six of the last eight sessions, losing 10 percent, as second-quarter profit reports raised investor concern that earnings growth will slow later this year as rising interest rates slow the economy. The index surged 35 percent from its year-to-date low in May through July 17.
Average profit growth among S&P 500 companies is expected to be 20.7 percent in the second quarter, according to First Call/Thomson Financial, down from 23.6 percent in the first quarter. About 78 percent of the index's members have reported results.
WorldCom lost $5.4375 to $39.3125. The company said it sees sales growing less than expected for the rest of the year, even as it reported second-quarter profit that matched analysts' expectations.
Nokia's Drop
Nokia's U.S. shares fell $13.9375, or 25 percent, to $41 and were the most-active stock in U.S. trading with 121 million shares changing hands. The Finnish mobile-phone company said third- quarter profit will be lower than the second quarter's.
``Nokia reported a great number but guided the third quarter lower, so it's looking weaker and this is a darling in the wireless handset market,'' said Michael Manns, who helps manage $8 billion for American Express Asset Management Group.
Motorola Inc., the No. 2 cellular phone maker, fell $3.125 to $33.50.
Shares of Texas Instruments Inc., RF Micro Devices Inc., Cypress Semiconductor Corp. and Analog Devices Inc. fell after Nokia warned that customers may be delaying handset purchases. The companies all make chips used in wireless devices.
Texas Instruments dropped $7.3125 to $56.6875, RF Micro plunged $8.50 to 71, Cypress fell $8.0625 to $35.6875, and Analog Devices slid $7 to $63.50. The declines helped pull the Philadelphia Semiconductor Index down 8.2 percent, its seventh drop in nine sessions.
Amazon.com Drops
Amazon.com Inc. lost $4.6875 to $31.375, for a drop of 24 percent this week.
Amazon said it had $577.9 million in sales for the second quarter, missing the $585 million average estimate of analysts polled by First Call. It also said its second-quarter loss more than doubled.
MicroStrategy Inc. dropped $6.25 to $23.75. The maker of data- delivery software reported a second-quarter loss before charges that was 1 cent a share wider than estimates.
Nortel fell $5.25 to $78.625. Nortel shares rose 3.1 percent Tuesday after reports about the possible sale surfaced. Corning fell $9.375 to $248.75.
Durable-Goods Report
Orders for big-ticket items surged 10 percent in June, led by demand for commercial aircraft, the Commerce Department said. The rise was the largest since a 13.9 percent jump in July 1991.
``Durable-goods orders show value names are still going to do okay,'' said Dan Bandi, a money manager at National City Investment Management, which oversees $23 billion. ``The earnings growth these companies are going to get, relative to where they're selling, still looks good.''
Bandi's Armada Equity Income Fund has returned an average of 12 percent over the past five years.
Exxon-Mobil, which on Tuesday reported second-quarter profits that doubled, rose $3.8125 to $80; Coca-Cola, whose earnings gained 27 percent, climbed $1.625 to $60.4375; Johnson & Johnson, which had a 14 percent earnings increase, advanced $1.625 to $91.875.
JDS Uniphase dropped $7.3125 to $128.625. After exchanges closed yesterday, the No. 1 maker of parts for fiber-optic communications equipment reported profit from operations that beat expectations by 2 cents a share. JDS Uniphase rose 4.4 percent yesterday, ahead of its addition to the S&P 500.
Rambus Inc. fell $8.8125 to $66.6875, its eighth straight decline, after Intel Corp. said it may adopt yet another computer memory standard that competes with a design from Rambus. Intel yesterday ended its exclusive endorsement of a Rambus memory design. Intel fell $2 to $137.
TyCom IPO
TyCom Ltd. rose $4 to $36 in the first day of trading for the maker of undersea fiber-optic cable. The unit of Tyco International Ltd. raised $2 billion in an initial stock sale yesterday.
TyCom plans to use proceeds from the sale to expand services and build its own undersea fiber-optic cable network, competing directly with Global Crossing Ltd. Global Crossing shares fell $2.25 to $26.25.
Go2Net Inc. fell 12.50 cents to $60.4375. The Web-site operator backed by Microsoft Corp. co-founder Paul Allen agreed to be acquired by InfoSpace Inc., a provider of services to Web sites and wireless carriers, for about $4 billion in stock.
InfoSpace will pay 1.82 of its shares, or $86.91, for each of Go2Net's 46.2 million fully diluted shares. That's 43 percent more than Go2Net's closing price of $60.5625.
InfoSpace Inc. lost $13.25 to $34.50.
Best Regards, J.T. |
