Old Economy stocks moved into positive territory after Federal Reserve Chairman Alan Greenspan wrapped up his testimony before the House Budget Committee. Tech stocks slipped into the red as a profit warning from software maker Oracle Corp. (ORCL) pressured the Nasdaq.
Greenspan's comments Wednesday did not indicate another emergency interest-rate cut was on the way, causing the market to sell off. The Fed lowered rates twice, by a total of 100 basis points, to head off an economic slowdown.
Joining the ranks of many other high-profile technology names, Oracle said the soft U.S. economy would drive profits down below Wall Street's estimates. The stock hit a new 52-week low.
Adding to the gloomy Wall Street mood was local phone provider SBC Communications Inc. (SBC), which warned quarterly profits may fall short of analysts' forecasts. Factors cited included costs to upgrade service in its Ameritech unit, and efforts to offer new Internet and long-distance telephone services, according to news reports. Shares of both Oracle and SBC Communications were trading lower.
"I think we will continue to see more earnings disappointments; we're not at the end of this cycle yet. Clearly the economy has slowed down, and there is high probability that Mr. Greenspan will enact another interest rate cut, perhaps as soon as the next FOMC meeting." Lance James, manager of Babson Enterprise Fund II told S&P's AdvisorInsight.
Beaten down semiconductor stocks were a bright spot on the Nasdaq, gaining about 5.2% as a group. Oracle and networking giant Cisco (CSCO) were the most actively traded issues on the exchange.
After a dismal start, the Dow climbed 55.88 points, or 0.53%, to 10,506.02. The biggest movers on the 30-stock index were information technology company Hewlett-Packard (HWP), chip maker Intel (INTC) and paper giant International Paper (IP).
The Nasdaq, which rebounded somewhat, was down 23.40 points, or 1.07%, to 2,159.97. And the broader-based S&P 500 was up 0.29 points, or 0.02%, to 1,241.52.
Treasuries were trading lower. On the economic news front, Greenspan was testifying before a House panel. In comments that largely mirrored those delivered to Senate lawmakers last month, Greenspan repeated his backing for tax cuts but warned a House panel against the possible erosion of fiscal discipline in the United States, according to news reports.
Stocks in the News
Photography giant Eastman Kodak Co. (EK) said it had suspended its $2 billion stock buyback program in order to accelerate its debt-reduction efforts and give it the financial flexibility to pursue possible acquisitions: Reuters
Xerox Corp. (XRX) is close to selling half of its 50% stake in Fuji Xerox Co. for slightly less than $1.5 billion, according to people familiar with the matter, according to WSJ.com. The sale to its Japanese partner, Fuji Photo Film Co, gives Xerox much needed time to execute a turnaround plan of its struggling copier business, the paper said.
European markets closed mixed. The London Financial Times-Stock Exchange 100 index ended lower by 50.00 points, or 0.85%, to 5,858.60. In Germany, the DAX Index was up 35.64 points, or 0.58%, to 6,159.02. Meanwhile, France's CAC 40 Index ended down 49.42 points, or 0.93%, to 5,291.92.
In Asia, the markets ended sharply lower. Japan's Nikkei 225 Index closed down 419.86 points, or 3.31%, to 12,261.80 -- a new 15-year low that was led by high-tech and bank shares. Hong Kong's Hang Seng index, meanwhile, finished down 394.13 points, or 2.74%, to 13,966.43.
Voting along party lines, the House Ways and Means Committee approved the heart of President Bush's tax cut plan and set up a vote in the full House next week: the New York Times
The Census Bureau urged Commerce Secretary Donald L. Evans not to adjust the 2000 population tally to make up for millions of uncounted people, ending a battle that will affect the allocation of federal funds: NYT
Contract talks between the Writers Guild of America and the Alliance of Motion Picture and Television Producers broke off without an agreement on Thursday. The two sides failed to close a wide gap between their financial proposals: Inside.com By Heesun Wee and Amy Tsao in New York