Stocks End Lower on Earnings Fears
U.S. stock markets finished lower Tuesday amid concerns about corporate profits. The losses came despite upbeat news from Amazon.com (AMZN ) and Lucent Technologies (LU ). Investors sold technology stocks on concerns that computer-related shares still are too expensive.
On Tuesday, the Dow Jones industrial average lost 58.05 points, or 0.59%, to 9,713.80. The Nasdaq Composite index lost 47.77 points, or 2.47%, to 1,882.57. The broader Standard & Poor's 500 index fell 8.27 points, or 0.73%, to 1,119.31.
Internet retailer Amazon posted its first-ever quarterly net profit of $5 million, or $0.01 a share, vs. a loss of $545 million, or $1.53 a share, a year earlier. The seven-year old company says its sees 2002 sales up by 10% or more.
Meanwhile, telecommunications-equipment maker Lucent posted a fourth-quarter loss but says it expects to return to profitability in fiscal 2002, which ends in September.
The technology sector led declines on concerns of limited semiconductor growth after negative comments from Germany's Infineon, as well as a report from a Merrill Lynch analyst that chip shares are overvalued amid shaky earnings prospects and a still-weak economy.
Blue-chip stocks fell in a continuation of the softness seen last week on the heels of grim earnings announcements from IBM Corp. (IBM ) and J.P. Morgan (JPM ), as well as a disappointing capital spending forecast from Intel (INTC ). But gains by Wal-Mart helped limit losses in the broader S&P 500 index after smaller rival Kmart (KMT ) filed for bankruptcy protection.
In the latest news surrounding energy-trading company Enron (ENE ), numerous financial documents were shredded in the accounting department of its Houston headquarters after federal investigators had started an inquiry into possible illegalities at the now-bankrupt company, according to lawyers suing on behalf of Enron investors.
The Conference Board said its index of leading indicators for December jumped 1.2%, up from 0.5% in November, beating S&P estimates for a 0.7% increase. While there's no data on the docket for Wednesday, investors will key into Federal Reserve Chairman Greenspan's testimony to the Senate Budget Committee on Thursday, looking for any change in tone from his more cautious, reserved outlook on January 11. Uncertainty ahead of Greenspan will likely slow trading this week.
As first-quarter earnings season kicks into gear, about 30% of companies in the Standard & Poor's 500 index are set to release earnings this week. On Wednesday Exxon Mobil (XON ), Pfizer (PFE ), Amgen (AMGN ), Merrill Lynch (MER ), Boeing (BA ) and Corning (GLW ) will post quarterly profit reports.
Among other stocks in the news Tuesday, United Airlines parent UAL Corp.'s (UAL ) shares fell and its debt rating was cut by S&P after a presidential panel recommended that mechanics receive a 37.3% pay raise.
Willamette (WLL ) climbed after agreeing to be acquired by Weyerhaeuser for $55.50 cash per share. The company said merger talks with Georgia-Pacific have ended.
Eott Energy (EOT ) fell after Moody's reportedly placed the company's debt rating nder review for a downgrade.
Tyco International (TYC ) shares rose after the diversified company announced plans to separate itself into four independent, publicly traded companies, with an eye toward boosting the overall value of the company for its shareholders.
U.S. Treasuries were hit by some profit-taking after their recent gains. But the market held up remarkably well considering weekend press reports that Greenspan was interpreted too pessimistically on Jan. 11 and news that December leading indicators nearly doubled expectations at +1.2%. Exhausted stocks helped bolster the bond after Kmart declared bankruptcy.
European markets closed mixed. In London, the Financial Times-Stock Exchange 100 index added 10.70 points, or 0.21%, to 5,149.20. In France, the Paris CAC 40 added 22.92 points, or 0.52%, or 4,446.42. But Germany's DAX index slid 24.02 points, or 0.47%, to 5,045.72.
Asian markets ended sharply lower on Tuesday. Japan's Nikkei dropped 229.27 points, or 2.23%, 10,050.98 as weakness in the yen along with downgrades of about 10 banks torpedoed stocks. Hong Kong's Hang Seng index fell 202.56 points, or 1.84%, to 10,797.69.
By Suzanne Robitaille in New York