Stocks Slide to 12-Week Lows
Tuesday July 10, 4:52 pm Eastern Time
By Chelsea Emery
<<NEW YORK (Reuters) - Stocks tumbled to 12-week lows on Tuesday after grim news from retailers and the No. 1 fiber-optic cable maker Corning Inc. (NYSE:GLW - news) reignited worries that the hoped-for rebound in corporate profits will be slow to come.
Wall Street also fretted over a report showing U.S. retail sales fell in June. This indicated consumer spending is slowing and weakening the leg of the economy that has remained relatively strong, investors said.
``There are short-term problems with the market because second-quarter earnings reports just aren't going to be pretty,'' said Alan Kral, a portfolio manager with Trevor Stewart Burton & Jacobsen Inc., which oversees $750 million. ''Corning certainly isn't helping the situation.''
The technology-dominated Nasdaq Composite Index (.IXIC) lost 63.92 points, or 3.15 percent, to end at 1,962.79, its lowest close since April 17.
The Dow Jones industrial average (.DJI) slumped 123.76 points, or 1.2 percent, to 10,175.64, its lowest close since April 16.
The broader Standard & Poor's 500 Index (.SPX) slipped 17.26 points, or 1.44 percent, to finish at 1,181.52, its lowest close since April 16.
Retail-related shares were slammed.
Discount clothing retailer Factory 2-U Stores Inc. (NasdaqNM:FTUS - news) plunged $10.74 to $20 after saying sales fell 5.5 percent in June, and it expects earnings to be lower than Wall Street expectations because of the slowing economy.
Linens 'N Things Inc. (NYSE:LIN - news) lost $3 to $23.20. The Wall Street house Credit Suisse First Boston cut its investment rating on the stock. The home fashions retailer warned earnings would fall below forecasts due to a soft economy.
Corning dropped 98 cents to $14.12. The company will cut jobs, close plants and take $5.1 billion in charges amid a telecom slump that could last another 12 to 18 months. Corning said its results before charges will top estimates in the second quarter, but will lag for the rest of the year.
``Corning certainly didn't give people confidence that we've seen the lows yet,'' said Robert Cohen, a trader with Credit Suisse First Boston. ``After last week, there's no reason to get aggressive on the market''
Other fiber optic-related stocks slumped, including JDS Uniphase (NasdaqNM:JDSU - news), which lost 95 cents to $10.79, and Ciena Corp., (NasdaqNM:CIEN - news) which dropped $2.92 to $29.32.
Lucent Technologies Inc. (NYSE:LU - news) fell 34 cents, or 5.35 percent, to $6.01 after the struggling telecommunications equipment giant said it plans to restructure its businesses into two major segments -- wireline and wireless -- over the next few weeks to help rebuild sales.
A large merger between two energy companies grabbed the spotlight. Amerada Hess Corp. (NYSE:AHC - news) will buy Triton Energy Ltd. (NYSE:OIL - news) for $2.7 billion in cash, raising its profile in the ranks of global integrated oil companies. Triton rocketed $14.53, almost 50 percent, to $44.43, but Amerada Hess lost $2.01 to $77.35.
Among economic news, Instinet Research said its Redbook Retail Sales Average posted a 1.3 percent drop in the five retail weeks of June, compared with a target for a decline of 1.2 percent. The average, which marks U.S. retail sales at discount, chain and department stores, was mostly unchanged in the latest week.
Sales during the July Fourth holiday were ``disappointing'' as a slowing economy, the volatile stock market and higher energy costs kept many shoppers away from stores, Redbook said.
Another report showed inventories on U.S. wholesalers' shelves rose in May as stockpiles of nondurable items such as clothing, groceries and pharmaceuticals increased, the government said.
Wholesale inventories rose 0.2 percent, the biggest monthly gain since November of last year, the Commerce Department said.
The increase exceeded expectations. A group of economists polled by Reuters forecast, on average, that wholesale inventories would be unchanged in May.
Genentech Inc. (NYSE:DNA - news) sank $8.26 to $43.85. Switzerland's Novartis AG said the asthma drug it is developing with Genentech hit a regulatory hurdle when the U.S. Food and Drug Administration requested more data on the drug.
The two drug companies plan to pay a royalty to the drug's creator, Tanox Inc. (NasdaqNM:TNOX - news), a small biotechnology company that saw its shares plummet $11.16 to $14.20, making it the biggest percentage loser on the Nasdaq.
Not all the news was gloomy, though. TiVo Inc. (NasdaqNM:TIVO - news), a provider of personal television recording services, jumped $1.81 to $6.88 after hinting its quarterly results would match forecasts.
Dow component AT&T Corp. (NYSE:T - news) rose $1.94 to $20.64 and was the most active on the New York Stock Exchange for the second straight session, after the telephone giant received an unsolicited $44.5 billion bid over the weekend from cable company Comcast Corp (NasdaqNM:CMCSK - news; NasdaqNM:CMCSA - news) for its broadband unit. Comcast slipped 39 cents to $38.91.
``We are in a muddle here,'' said Charlie Crane, a strategist at Victory SBSF Capital Management, which oversees $4.5 billion. ``Investors on the one hand are getting doused with bad news on earnings every day and the near-term outlook for continued sluggishness on the profit front. On the other hand, there is the recognition that we had six rate cuts and that at some point that will have a stimulative effect on the economy.''
Investors are bracing for almost 300 financial reports this week and 1,500 next week as the second-quarter reporting season gathers steam, according to research firm Thomson Financial/First Call. Analysts expect earnings for S&P 500 companies will fall more than 17 percent in the second quarter, but investors are hoping companies will forecast better times after the Federal Reserve cut interest rates six times this year.>> |
