Stocks lost substantial ground Friday after a lackluster earnings forecast from Juniper Networks (JNPR) and a technical problem at the New York Stock Exchange that delayed trading for several hours.
Many investors have begun to take the view that an economic recovery is around the corner and the stock market is transitioning from bearish to bullish. But optimism is being dampened by concerns over the current quarter's results.
"It appears that many companies are less than enthusiastic about their current quarter's earnings and near-term earnings prospects -- this also will negatively impact revenue and inventory," Alan Ackerman, chief market strategist, Fahnestock & Co. told S&P's AdvisorInsight. "Investors are very wary of profit warnings and negative surprises."
The latest negative earnings pre-announcement from networking equipment maker Juniper led technology stocks lower. The company warned that second-quarter results would not meet expectations and it would cut 8% to 9% of its staff.
Tech bellwether Intel Corp.'s (INTC) second-quarter sales update after the market close Thursday was taken as a positive sign for the chip industry, but Juniper's bad news stole the show Friday. The Nasdaq Composite ended off 48.90 points, or 2.16%, to 2,215.10.
After the market close Thursday, the closely-watched chipmaking giant said it expects that revenue, gross margin percentage and expenses for the second quarter will be within the previous expectations, though on the low end of the previously announced ranges. Many analysts saw Intel's announcement as a sign that the worst is over for the semiconductor industry and a rebound is imminent.
Uncertainty fueled some of Friday's losses as NYSE-listed stocks were not all trading until late in the session. Technical problems caused a glitch in trading on NYSE stocks. For an hour and a half this morning, the exchange's trading was interrupted on some stocks, leading to a decision to halt all trade. The futures market was also shut down. Both the Big Board and derivatives trading resumed trading at 11:35 a.m. EDT.
The Dow Jones Industrial Average finished down 113.74 points, or 1.03%, to 10,977.00. The broader S&P 500 index lost 12.00 points, or 0.94%, to 1,264.96.
Among other stocks in the news Friday, conglomerate Tyco International Ltd. (TYC) said it sold some operations of its financial services unit CIT to GE Capital in its effort to get rid of $6 billion of non-strategic assets.
U.S. Treasuries finished lower in the absence of economic data. Next week traders will look to key reports on retail sales, producer price index, consumer price index and the University of Michigan's consumer sentiment for direction.
European markets finished mixed. On the heels of U.K. Prime Minister Tony Blair's landslide re-election win, London's Financial Times 100 index ended up 2.30 points, or 0.04%, to 5,950.60. In Euroland, the European Central Bank left rates unchanged as the bank remains worried about inflation. France's CAC 40 Index finished off 13.46 points, or 0.25%, to 5,439.93. In Germany, the DAX Index finished down 2.96 points, or 0.05%, to 6,187.21.
Asian markets ended higher. In Tokyo, the Nikkei closed up 152.71 points, or 1.15%, to close at 13,430.22, fueled, in part, by Intel's suggestion of stability in the chip business. In Hong Kong, the Hang Seng gained 105.46 points, or 0.77%, to close at 13,808.89.
Britain re-elected Tony Blair and his Labour Party in a second straight landslide. With 418 of the 659 constituencies reporting, Labour had won 330 seats, just enough for a majority: WSJ.
The Bush administration is considering a crash effort to put into place a rudimentary missile defense system before the end of President Bush's current term in 2004: Wash Post.
A new Energy Department forecast Thursday predicted that gasoline prices will drop nearly a dime a gallon at the pump, from the current average of $1.71 a gallon: Wash Post.
Eight Japanese children were killed and nearly 20 others injured when a middle-aged man with a kitchen knife burst into their elementary school classroom and began stabbing at random: Reuters. By Amy Tsao in New York