Stocks Close Lower
Stocks ended broadly lower as bad news on the corporate earnings front dragged the major indexes lower. With many traders extending the Independence Day holidays, equities never had a chance to build any buying interest. Volume was exceedingly light with some 931 million shares traded on the New York Stock Exchange.
The techs of the Nasdaq were among the weakest performers, led by Marconi plc (MONI ). The company warned that fiscal 2002 operating profit would be 50% below the year ago on a sales drop of about 15%. Retailers faced selling pressure after Federated Department Stores (FD ) said it sees $0.40-$0.50 second quarter EPS from operations, down from its earlier $0.70-$0.75 forecast. The retailer also cut its fiscal 2002 forecast to $3.60-$3.90 from $4.00-$4.25.
There was little reaction in the markets from initial jobless claims for the week ending June 30, which rose to 7,000 to 399,000. In other economic news, the June NAPM non-manufacturing index rose to 52.1 in June from 46.6 in May.
Larry Rice, chief investment officer for Josephthal & Co. says today's weakness is mainly due to negative news on the corporate earnings front. He adds, however, that the market doesn't appear to be being driven to any great degree to the downside. "The breadth of the market has been very impressive in the past few weeks," he says. "Tech stocks seem to be holding up here incredibly well, in spite of an onslaught of pre-announcements."
The strategist remains skeptical about tech stocks at this juncture and doesn't think the Nasdaq has hit its ultimate bottom, citing what he considers high price-earnings ratios. Rice says that many companies "continue to get people's hopes up" by indicating that the third quarter could mark a turnaround. "So there's a lot of hope and hype taking place in tech."
Among Thursday's stocks in the news, ASML Holding NV (ASML ) forecast a 95 million to 105 million euro six-month loss. The company says that customer comment about their second and third quarter outlook lead it to believe a market recovery in the fourth quarter is more unlikely. In other corporate news, the European Commission Wednesday officially blocked General Electric's (GE ) offer to acquire Honeywell International (HON ).
The Dow Jones Industrial Average ended lower by 91.25 points, or 0.86%, at 10,479.86. The Nasdaq Composite shed 60.58 points, or 2.83%, to end at 2,080.22. Meanwhile, the broader S&P 500 index lost 15.20 points, or 1.23%, to finish at 1,219.25.
There remains uncertainty regarding the U.S. economy. Market insiders will be looking at Friday's employment report for some guidance. That and the ongoing saga that is earnings confession season will likely drive the market from the opening bell.
Treasuries closed slightly off following the initial jobless claims report. Treasuries were already sliding as stocks edged off their lows, but were knocked lower still on an unexpected rise above the 50-50 level in the NAPM non-manufacturing index for June.
European markets are lower. In London, the Financial Times 100 Index is down 50.90 points, or 0.91%, to 5549.60. France's CAC 40 Index is off 51.30 points, or 0.99%, 5123.83. Germany's DAX index is down 31.29 points, or 0.52%, to 5984.43.
Asian markets closed lower. In Japan, the Nikkei 225 Index ended down 21.72 points, or 0.17%, to close at 12,607.30. Hong Kong's Hang Seng index lost 208.05 points, or 1.58%, to 12,999.48.
By Alan Hughes in New York