Stocks recovered substantially from session lows on bargain hunting and short-covering, but still finished moderately lower Friday, capping a week marked by lowered expectations for financial results and a crisis of confidence in corporations.
The volatile session was sparked by tech bellwether Intel (INTC), which lowered its revenue guidance. The bad news created a ripple effect on the major equity averages including the tech-laden Nasdaq. A lackluster May jobs report added to the bearish tone.
The major averages were all near September lows on Friday. After trading down more than 100 points in early trading, the Dow Jones industrial average recovered some ground to close down 34.97 points, or 0.36%, to 9,589.67. The tech-heavy Nasdaq composite index fell 19.40 points, or 1.25%, to 1,535.48. The broader Standard & Poor's 500 Index slipped 1.62 points, or 0.16%, at 1,027.53.
Losers included semiconductors, biotechs and gold. Sectors on the plus side included oil and gas and HMOs.
Looking ahead to the week of June 10, several economic reports are expected. On Wednesday, a report on U.S. export and import prices for May is due. On Thursday, U.S. retail sales for May are anticipated, as well as the producer price index (PPI) for May, an important gauge of inflation at the wholesale level.
On the earnings front, companies scheduled to report results next week include: H&R Block (HRB) on Wednesday and Adobe Systems (ADBE) on Thursday. American Electric Power (AEP) is slated to report earnings on Friday, June 14.
After the closing bell Thursday, June 6, Intel, a leading maker of semiconductors, cut its revenue guidance for the second quarter to between $6.2 billion and $6.5 billion from its previous indication of $6.4 billion to $7 billion, citing lower-than-expected demand in Europe. Wall Street followed suit, with S&P, CIBC World Markets and JP Morgan among others downgrading their respective investment recommendations on the stock, while USB Piper cuts its estimates for the chipmaker.
Analysts and investors had prepared themselves for a narrowing of the revenue range toward the lower end of the company's prior forecast, but were surprised that Intel took the bottom out of its previous range, indicating that demand is even weaker than earlier thought, according to wire reports. Shares of Intel ended down more than five points or 18% on Friday.
Among other stocks in the news Friday, Biogen (BGEN) on Friday said its earnings this year will be substantially below expectations because sales of its flagship multiple sclerosis drug Avonex are slowing.
And shares of Tyco International (TYC) skidded 30% to $10.10 Friday on a Wall Street Journal report that New York prosecutors are broadening their probe into whether the company used its money to buy homes and artwork for several executives without disclosing it to shareholders. There was also concerns that the IPO of its financial services unit CIT Group may be delayed. JP Morgan, meanwhile, downgraded Tyco stock to market perform from buy.
U.S. Treasuries ended lower. In economic news, the Labor Department said the U.S. economy created jobs more slowly than anticipated in May. But an unexpected fall in the unemployment rate to 5.8% offered a glimmer of hope for the downtrodden job market, according to wire reports. The two-tenths of a percentage point drop in the jobless rate defied expectations that the rate would edge higher.
However, even amid a recovery in the broad economy, businesses remained wary of hiring aggressively. The number of workers on U.S. payrolls outside the farm sector grew by 41,000, the biggest gain in 15 months but still smaller than the 58,000 increase forecast by private economists.
European markets closed down, taking a cue from U.S. techs and the Intel news. In London, the Financial Times-Stock Exchange 100 index was down 37.20 points, or 0.75%, to 4,920.40, with little reaction to report that the UK CIPS Services Index rose too 56.7 in May from 54.5 in April.
In France, the CAC 40 lost 77.91 points, or 1.90%, to 4,020.27.
And in Germany, the DAX Index was lower by 47.34 points, or 1.02%, to 4,610.18. In addition to Intel, also contributing to the selling was a report that German unemployment rose in May for the 15th month in 17 months. Plus, construction workers went on strike before taking a strike vote.
In Asia, the markets finished with losses. The Nikkei dropped 136.41 points, or 1.18%, to 11,438.53. The selling was led by technology stocks on earnings pessimism after Intel lowered its second quarter (April-June) sales estimate.
In Hong Kong, the market lost 96.06 points, or 0.84%, to 11,284.71.