Yahoo! Warning Prompts Tech Skid
Technology stocks stumbled Thursday after tech bellwether Yahoo! Inc. (YHOO ) warned of lower earnings -- ending a three-day winning streak on Wall Street. Stocks on the Dow, meanwhile, finished with triple-digit gains.
On Wednesday, after the closing bell, the Internet portal announced 2001 earnings would probably fall well below already reduced Wall Street's estimates, and that longtime Chief Executive Tim Koogle would step down from that post. Yahoo!, which ended down more than 3 points, led Internet stocks lower.
"The bad news from Yahoo! was not too surprising. It primarily reflects the problems of advertising over the Internet. And, as Yahoo!'s earnings were worse than expected, this has also negatively impacted stocks like America Online (AOL ) and DoubleClick Inc. (DCLK )," Frank Cappiello, manager of Cappiello-Rushmore Trust: Growth Fund told S&P's AdvisorInsight.
"Even though the Nasdaq has recently enjoyed a three-day rally, the market is still so weak, any bad news coming out of any tech or telecom stock sends the Nasdaq into a bit of a downward spiral," Cappiello said.
Meanwhile, investors continued to look to the Federal Reserve for an interest rate cut, which could help growth by decreasing borrowing costs and encouraging spending. The Fed widely is expected to cut interest rates by half a percentage point at its next policy-setting meeting on March 20.
And the blue chips? Buyers embraced industrial cyclicals and defensive consumer nondurables. A strong performance by the Dow Industrials was led by Old Economy stalwarts 3M Corp. (MMM ), Procter & Gamble (PG PG) and Johnson & Johnson (JNJ JNJ).
The Dow Jones Industrial Average closed with a gain of 128.06 points, or 1.19%, to 10,857.66. The Nasdaq finished down 55.64 points, or 2.50%, to 2,168.28. The S&P 500 ended up 2.64 points, or 0.21%, to 1,264.53.
Treasuries ended mixed. In economic news, the government on Thursday said the number of people filing for first-time unemployment benefits fell by 4,000 last week, but remained at inflated levels due in part to increased layoffs in the auto industry, according to news reports. The decline in claims was not as steep as private economists had expected.
Looking ahead into the rest of the week, Treasuries were likely to trade sideways, as investors lack any key economic data until the February U.S. jobs report on Friday, according to Standard & Poor's AdvisorInsight. The jobs report is expected to show few new jobs were created in the month.
Stocks in the News
Women's apparel retailer AnnTaylor Stores Inc. (ANN ) said its February same-store sales fell 6.1% and warned earnings for the first half of the year would fall short of expectations, dampened by heavy discounting on spring merchandise: Reuters.
The world's largest retailer, Wal-Mart Stores Inc. (WMT ) said February same-store sales -- units open at least one year -- rose 4.3% from a year ago: Reuters.
Aegon NV, the Dutch insurance group, said it agreed to buy J.C. Penney Co.'s (JCP ) U.S. direct-marketing business for $1.3 billion. Aegon said the business will be folded into the Aegon USA companies, making Aegon USA the largest direct marketer of life and supplemental-health insurance in the U.S.: WSJ.com.
Federal regulators have issued a warning to drugmaker Eli Lilly and Co. (LLY ) about quality-control problems at its Indianapolis injectable product manufacturing plant, the company said on Thursday: Reuters.
European markets were trading on a mixed note. The London Financial Times-Stock Exchange 100 index ended up 1.40 points, or 0.02%, to 6,003.20. In Germany, the DAX Index was lower by 39.53 points, or 0.82%, to 6,266.11. Meanwhile, France's CAC 40 Index ended down 45.02 points, or 0.82%, to 5,438.66.
In Asia, the markets ended mixed. Japan's Nikkei 225 Index closed down 73.33 points, or 0.58%, to 12,650.56. Hong Kong's Hang Seng index, meanwhile, finished up 31.59 points, or 0.22%, to 14,208.95.
By Heesun Wee and Amy Tsao in New York