Despite a rebound from early declines, tech stocks retreated to finish lower Wednesday on familiar concerns including earnings warnings and job cuts. Blue chips, meanwhile, managed to eke out a positive finish.
While stocks opened the session lower, investors looking for bargains helped push stocks higher in midday trading action. But as the session wore on, those gains couldn't be sustained.
Dick Dahlberg, managing director of Pioneer Investment Management and manager of Pioneer II/A called the early market action "a pretty broad bounce," according to Standard & Poor's Advisor Insight. "Every major area - each of the major sectors - seems to be up, with energy and technology probably showing the most bounce," he noted. "I think we are obviously at a very oversold position in the market, getting ready to rally at some point."
But earnings warnings and layoffs tempered the cautious buying mood. In technology, Lucent Technologies Inc. (LU) said it expects to lay off 1,000 workers, double the amount of cuts previously announced. Rumors also were circulating the company will file for bankruptcy, but company officials denied the rumors, according to news reports.
According to Standard & Poor's research unit, there was also talk on trading desks about Lucent's ability to meet its debt obligations in the current economic downturn, and amid its poor spinoff debut of Agere Systems Inc. (AGRA), which was some $2.5 billion less than the company had hoped to get. Further, on Monday Lucent began using its bank credit facilities to maintain ongoing operations that some viewed as a serious negative. Shares of Lucent lost more than 14% to close at $6 and change.
U.S. investment bank Morgan Stanley (MWD) also was considering laying off as many as 1,000 brokers, or 7% of its brokerage force, as part of a plan to cut nearly $1 billion in costs, according to press reports. Shares of Morgan Stanley shed more than 6%.
On the economic news front, Federal Reserve Chairman Alan Greenspan testified before the Senate Finance Committee, and as expected, did not discuss the near-term economic outlook or interest rates. He instead made a broad pitch for free trade.
By the end of the roller-coaster session, the Dow index gained 27.95 points, or 0.29%, to 9,513.66. Gains among old-economy names like Caterpillar Inc. (CAT) were offset by tech losses including Intel Corp. (INTC). Tech stocks continued to bear the brunt of the selling mood, with the Nasdaq composite ending down 34.23 points, or 2.05%, to 1,638.77. The broader Standard & Poor's 500 index finished off 3.21 points, or 0.29%, to 1,103.25.
Stocks were trying to recover from a severe sell-off Tuesday that left the market at 2-year lows. The Nasdaq Composite lost 6.2% for the day, while the Dow and Standard & Poor's 500 index each shed more than 3%.
Treasuries ended lower, on modest strength in equities. Looking ahead to Friday, the market was awaiting the government's monthly employment report.
Stocks in the News
TheStreet.com Inc. (TSCM) said it would cut its workforce by 20% in a drive to slash annual costs by $15 million. The cuts were especially deep in the newsroom, with layoffs hitting more than 30% of the editorial staff, including several senior editors. This is the second round of layoffs at TheStreet.com following a similar cost-cutting move last fall, according to the investing website.
Tenet Healthcare Corp. (THC) said third-quarter operating profits rose 25 percent as higher fees helped the No. 2 U.S. hospital chain beat earnings expectations, according to news reports.
Commerce One Inc. (CMRC) warned its first-quarter loss will be wider than it had expected, joining other leading business-to-business software makers in presenting a disappointing outlook for the period.
European markets ended higher. In London, the Financial Times-Stock Exchange 100 index closed up 72.60 points, or 1.33%, to 5,535.70. In Germany, the DAX Index was up 56.84 points, or 1.02%, to 5,610.30. In France, the CAC 40 finished higher by 67.82 points, or 1.36%, to 5,071.82.
In Asia, the markets ended mixed. The Nikkei gained 118.31 points, or 0.90%, to 13,242.78. Banks and securities houses were some of the biggest gainers, bolstering the market against losses in technology shares following the Nasdaq's decline Tuesday, and brushing off the government's postponement of its emergency economic package release. In Hong Kong, the Hang Seng ended down 520.51 points, or 4.14%, to 12,063.71. By Heesun Wee In New York