Tech woes prompted the markets to close down Friday after high profile tech companies Dell Computer Corp. (DELL ), Hewlett-Packard Co. (HP ) and Nortel Networks Corp. (NT ) warned of lower near-term growth.
After Thursday's close, investors and Wall Street were hit by a round of bad tech news that haunted the markets Friday. Dell, the world's No. 2 maker of personal computers, announced plans of its first-ever large-scale layoffs and reduced its earnings forecast for the current quarter. H-P reported a decline in first quarter operating income and said it saw no near-term growth in its U.S. personal computer business. And Nortel, the world's leading supplier of fiber-optic telecom equipment, cut its revenue and earnings per share growth forecast for 2001 to the 10% to 15% range.
Earlier Friday, Wall Street also digested a fresh batch of economic data including a much larger than expected increase in producer price index for January -- a key inflation gauge. The data suggested an economic downturn that may not be as severe as anticipated, leading investors to suspect the Federal Reserve may not lower interest rates aggressively -- to help lift sagging corporate profits.
And in corporate news, Schering Plough (SGP ), maker of popular allergy drug Claritin, said its first quarter earnings per share will be lower by as much as 15% compared to 1999's EPS of $0.42, citing manufacturing problems.
"You got some pretty big individual hits going on here, which tends to color the background black," Robert Morris, chief investment officer at Lord Abbett & Co., told Standard Poor's research unit.
Led by losses among major technology names including H-P, the Dow ended down 91.20 points, or 0.84%, to 10,799.82. The Nasdaq shed 127.28 points, or 4.99%, to 2,425.63. Meanwhile, the S&P 500, a gauge of the broader market, finished down 25.19 points, or 1.90%, to 1,301.42.
U.S. treasuries finished higher, as investors sought safety from volatile equities. Earlier, the government released economic data that suggested the economy is not slowing as quickly as previously thought. PPI, an important inflation gauge, rose a whopping 1.1%, helped by strength in crude goods, while the consensus forecast was a 0.3% increase. The core figure, without food and energy, increased by 0.7% after rising 0.1% in December.
In other economic news, January housing starts, or applications for permits to build new homes, rose 1.543% for the six-month moving average, which is a dramatically stronger-than-expected increase.
Additionally, industrial production fell 0.3% in January from a revised 0.5% drop in December, which was originally down 0.6%. Capacity utilization fell to 80.2%, down from a revised 80.7%, which originally was 80.6% -- the lowest rates since August 1992.
Stocks to Watch
Schering-Plough (SGP ), maker of popular allergy drug Claritin, said first quarter EPS will be lower by as much as 15% compared to 1999's EPS of $0.42, citing manufacturing problems. Control issues have led to reduced sales of certain products in the U.S. Bear Stearns cut estimates on the company.
Optical fiber firm Corning (GLW ) said it's confident first quarter EPS will be within the previously announced range of $0.28 to $0.31. The company lowered 2001 revenue growth estimate for photonic technologies business from between 75% and 90% to 50%. Corning is still confident in a 2001 EPS of $1.40 to $1.43.
Analog Devices (ADI ) posted first quarter EPS of $0.50 compared with $0.25, on a 58% revenue rise. The circuit maker sees second quarter EPS of $0.43 to $0.44, on 6% to 8% sequential revenue decline. S&P cuts estimates.
European markets ended lower, amid concerns over the weak U.S. high-tech environment. The London Financial Times-Stock Exchange 100 index closed down 109.60 points, or 1.77%, to 6,088.30. In Germany, the DAX Index ended off 136.10 points, or 2.06%, to 6,455.57. Meanwhile, France's CAC 40 Index finished down 109.40 points, or 1.92%, to 5,595.13.
In Asia, the markets finished lower. Japan's Nikkei 225 Index closed down 151.90 points, or 1.14%, to 13,175.49. Hong Kong's Hang Seng index, meanwhile, ended down 126.06 points, or 0.80%, to 15,630.3.
Baghdad came under air attack on Friday, and the U.S. military confirmed it had launched an air strike on the Iraqi capital: Reuters
By Amy Tsao and Heesun Wee in New York