Stocks fall sharply despite Microsoft, Intel earnings; tech shares gain
By Hope Yen AP Business Writer
NEW YORK (AP) – Investors brushed aside a wave of encouraging earnings Wednesday, giving blue-chip stocks their sharpest decline in more than two weeks. But tech shares managed a gain on strong results from Microsoft and Intel.
Analysts said many traders were choosing to cash in quick profits from the market’s recent rally on fears the advance may have been too much, too soon. Downbeat outlooks from Coca-Cola and 3M added to the pessimism.
“Keep in mind, we’ve had a pretty substantial rally as a result of the war,” said Todd Clark, head of listed equity trading at Wells Fargo Securities. “While earnings have been better than expected, we’re having a little bit of a sell-on-the-news mentality.”
The Dow Jones industrial average closed down 144.75, or 1.7 percent, at 8,257.61. It was the biggest decline since March 31, when blue-chip stocks finished 153 points lower; the loss also offset much of the 198-point gain in the previous two sessions.
The broader market finished mixed. The Nasdaq composite index rose 3.71, or 0.3 percent, to 1,394.72. The Standard & Poor’s 500 index dropped 10.90, or 1.2 percent, to 879.91.
Microsoft rose 30 cents to $24.91 after the software company reported fiscal third-quarter earnings that beat Wall Street’s lowered expectations.
Intel climbed $1.02 to $18.15 after the technology giant posted first-quarter profits that beat analysts’ estimates by 2 cents per share.
Stocks have gained in recent days as investors turn their attention from the war winding down in Iraq to the strength of U.S. corporate profits and the economy. Analysts say while first-quarter profits generally have been better than expected, they haven’t been spectacular.
“Investors had already set their bar pretty low on tech companies’ earnings in general,” said Steven Goldman, chief market strategist at Weeden & Co. “The market reacts to an anticipation that things will become more favorable. But we don’t anticipate anything earth-shattering so quickly.”
John C. Forelli, senior vice president and portfolio manager for Independence Investments in Boston, agreed.
“I suspect that much of the caution revolves around the uncertainty of whether the war in Iraq was a brake on the economy or whether the whole thing still needs another tune-up,” he said. “Nobody quite believes yet that this economy is about to start hitting on all cylinders again.”
A pair of encouraging economic reports, meanwhile, had little effect on investors.
The Labor Department reported consumer prices rose a modest 0.3 percent in March. The gain in the Consumer Price Index, the government’s closely watched inflation gauge, was smaller than the 0.6 percent jump in February and better than economists’ forecasts.
And the Commerce Department said the number of housing projects started in March jumped by 8.3 percent to a seasonally adjusted annual rate of 1.78 million. The rise followed a 10.4 percent drop in February.
Dow component Coca-Cola slid $2.63 to $39.90 after the soft-drink giant reported earnings that were in line with estimates; however, its volume growth in the first quarter was lighter than expected.
Another Dow component, 3M dropped $4.64 to $129 after J.P. Morgan cut its 2003 and 2004 estimates for the maker of Scotch tape and other products, citing slowing global demand.
And Altria fell 75 cents to $31.70 after the parent company of Philip Morris and Kraft foods notched first-quarter profits that beat estimates by a penny but also temporarily suspended its share buyback program.
Gainers included Ford Motor, which surged 88 cents, or 10.5 percent, to $9.23 after the world’s second-largest automaker reported first-quarter earnings that handily beat Wall Street’s estimates.
Declining issues outnumbered advancers about 4 to 3 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, which tracks smaller company stocks, fell 1.87, or 0.5 percent, to 377.73.
Overseas, Japan’s Nikkei stock average finished 0.5 percent higher Wednesday. In Europe, France’s CAC-40 fell 0.9 percent, Britain’s FTSE 100 dropped 1.6 percent and Germany’s DAX index declined 0.3 percent.
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