Stocks Stage Late-Day Recovery
Stocks fought its way back from deeply negative territory to finish flat to modestly higher Tuesday, as investors shook off a profit warning from Finnish mobile phone giant Nokia (NOK ). The news had rattled investors globally, already worried about second-quarter earnings results.
Nokia issued a surprise earnings warning, saying slower than expected market growth would lead to earnings per share of only 0.15-0.17 euros compared to earlier expectations of 0.20 euros. Nokia also said it expected second-quarter sales growth of below 10% year-on-year compared to earlier estimates of 20% due to deterioration in the general market. The company also cited uncertainty surrounding the economy, the transition to the mobile Internet and less aggressive marketing by telecom operators. Shares of Nokia ended down more than 17%.
Among other stocks in the news Tuesday, genetic technology company Affymetrix Inc. (AFFX ) said it projects a shortfall in second-quarter revenues and anticipated to report a net loss, before charges, of between $4 to $7 million due to weak demand for its GeneChip product line. Shares of Affymetrix lost more than 36%.
And the bad news from tech companies isn't over yet, Ronald Muhlenkamp, president of Muhlenkamp Funds, told Standard & Poor's research unit. Muhlenkamp expects technology stocks to remain weak through the third quarter. "We still see some denial of the downside risks for momentum stocks," Muhlenkamp said. Technology stocks haven't become attractive because of their high run-ups last year, he added.
While the market picked up some steam beginning in May, the current period during which companies warn about surprises for approaching second-quarter earnings season has investors on edge.
The Dow Jones Industrial Average gained 26.29 points, or 0.24%, to 10,948.38. The Nasdaq Composite ended relatively flat, down 0.78 point, or 0.04%, to 2,170. The broader S&P 500 index added 1.46 points, or 0.12%, to 1,255.85.
Looking ahead to Wednesday's market, many eyes will be focused on the initial public offering in U.S. food giant Kraft Foods Inc. (KFT ) by Philip Morris Cos. Inc. (MO ). The price range was set at $30 to $31 a share. With 1.74 billion shares to be outstanding, initial market value for world's second largest food company would be more than $52 billion. IPO proceeds will be used for debt reduction. Kraft's dominant market position and enhanced growth profile suggest upside from the IPO price, but will likely be offset by tobacco litigation exposure, according to Standard & Poor's research unit.
U.S. Treasuries ended higher as investors sought safety away from volatile equities. Dealers contacted by S&P's research unit said prices along the curve rose on low trading volume in line with equity weakness, weak retail data and some questioning of the prospects for a global rebound. The market also awaited key economic data due later in the week.
Nokia's warning also hit European markets, which ended lower. In London, the Financial Times-Stock Exchange 100 index lost 56.50 points, or 0.96%, to 5,804. In Germany, the DAX Index was down 106.32 points, or 1.73%, to 6,056.42. In France, the CAC 40 fell 106.53 points, or 1.97%, to 5,311.94.
In Asia, markets finished lower. The Nikkei plunged 386.38 points, or 2.92%, to 12,840.10 - ending below the psychologically important 13,000 level. There were losses across all sectors. In Hong Kong, the market lost 148.81 points, or 1.09%, to 13,526.68.
By Heesun Wee in New York