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Stocks lower on earnings warnings, profit-taking

4 min read

By Michael J. Martinez AP Business Writer

NEW YORK (AP) – Disappointing first-quarter profits from consumer-focused companies helped push stocks lower Friday as investors, fearing a further economic slowdown, collected profits from the previous session’s rally. A surge in oil prices past $55 per barrel also contributed to the sell-off.

While strong earnings from Google Inc. pleased investors, bad news from companies including Maytag Corp. and Costco Wholesale Corp., led Wall Street to wonder whether consumers were cutting back on spending. And, with the economy looking so uncertain, investors also decided to cash in some of their gains from Thursday’s rally, which gave Wall Street its best day in two years.

“We had such a big gain yesterday, it doesn’t surprise me that it hasn’t been met with more,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “We’re in the middle innings of a decent economic cycle, but there’s still enough distraction to keep us from a huge move skyward.”

In afternoon trading, the Dow Jones industrial average fell 22.31, or 0.22 percent, to 10,196.29, after gaining 206 points Thursday.

Broader stock indicators also lost ground. The Standard & Poor’s 500 index was down 2.54, or 0.22 percent, at 1,157.41, and the Nasdaq composite index down 18.04, or 0.92 percent, to 1,944.37.

Adding to the concern over consumer spending, oil prices continued their rise, with a barrel of light crude quoted at $55.50, up $1.30, on the New York Mercantile Exchange.

The bond market rallied after Thursday’s sell-off, with the yield on the 10-year Treasury note falling to 4.28 percent from 4.30 percent late Thursday. The dollar was mixed against other major currencies, while gold prices were higher.

The Nasdaq Stock Market Inc. was up 30 percent, or $3.23, at $13.88, after announcing plans to purchase Instinet Group Inc.’s electronic trading network, a move designed to improve Nasdaq’s position as competition grows among the world’s stock markets. Instinet skidded 48 cents to $5.22 on the news.

Google surged $12.55, or 6.2 percent, to $216.77 as it continued to pleasantly surprise investors with its latest earnings report. The online search company surpassed Wall Street profit forecast by 37 cents per share in the first quarter, and the stock reached a new high in the first minutes of trading.

Euphoria over Google was overshadowed, however, by earnings gloom from the consumer sector. Costco warned that gasoline sales were eroding its margins despite steady sales in other areas. Costco slid $3.18, or 7.2 percent, to $40.84.

Slower sales have forced Maytag to ramp up its cost-cutting plans. The appliance maker plunged 28 percent, or $4.18, to $10.92, after reporting a steep slide in first quarter profits, missing Wall Street profit forecasts by 10 cents per share. Maytag also reduced its earnings forecasts for the year.

Eastman Kodak Co. also saw a rough quarter as the world’s biggest film producer continued on its bumpy transition to digital imaging and photography. The company swung to a loss for the quarter and missed analysts’ forecasts by 30 cents per share after one-time charges. Kodak tumbled 9.9 percent, or $3.01, to $27.39.

In other merger news, MCI Inc. climbed 27 cents to $26.77 after Qwest Communications International Inc. continued its tenacious pursuit of its rival, upping its bid to $30 per share, or $9.7 billion. MCI had already agreed to a $23.10 per share, or $7.6 billion, bid from Verizon Communications Inc. Qwest shed 8 cents to $3.53, while Verizon was up 2 cents at $34.28.

Declining issues outnumbered advancers by about 5 to 4 on the New York Stock Exchange, where volume came to 967.02 million shares, compared with 1.14 billion at the same point on Thursday.

The Russell 2000 index of smaller companies was down 5.72, or 0.96 percent, at 593.26.

Overseas, Japan’s Nikkei stock average rose 0.56 percent. In Europe, Britain’s FTSE 100 was up 0.62 percent, Germany’s DAX index gained 0.70 percent, and France’s CAC-40 climbed 0.74 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

AP-ES-04-22-05 1414EDT

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