Stocks were down in lackluster late afternoon trade as three top gurus cut their 2001 earnings estimates for a broad market barometer, underscoring investors' worries over corporate profits in a sluggish economy.
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A dearth of economic data or key corporate earnings reports kept investors on the sidelines, making the trading session among the lightest of the year.
"We are very rangebound until we get some significant good news," said Arthur Hogan, chief market analyst at Jefferies & Co.
The blue-chip Dow Jones industrial average slipped 14.95 points, or 0.14 percent, to 10,401.72. The broad Standard & Poor's 500 Index was little changed, dipping 1.30 points, or 0.11 percent, to 1,204.52. The tech-laced Nasdaq Composite Index fell 11.25 points, or 0.55 percent, to 2,017.82.
About 1.33 billion shares traded on the Nasdaq Stock Market, according to preliminary figures, making it the fourth-lightest session of the year.
A very cautious approach to the U.S. equity market "makes a lot of sense" until there are unambiguous signs of a real earnings recovery, J.P. Morgan Chase & Co.'s chief portfolio strategist, Doug Cliggott, told clients in a note that cut his outlook for the S&P 500.
UBS Warburg's Ed Kerschner and Credit Suisse First Boston's Tom Galvin also trimmed their 2001 outlooks for the S&P 500.
Dragging on the Dow, conglomerate General Electric lost $1.05 to $43.60 on its plans to buy Heller Financial Inc. for about $5.3 billion. Heller soared $17.09 to $52.99 and was the Big Board's second-most active issue while GE was the most active.
Diversified industrial group Minnesota Mining and Manufacturing Co. , a Dow component, lost $2.10 to $109.38.
Investors are waiting for signs that the Federal Reserve's six interest-rate cuts this year are adding momentum to the nation's sluggish economy. The central bank meets on Aug. 21, when it is widely expected to cut rates for the seventh time this year in a bid to revitalize the world's largest economy.
Until then, the market will mostly mark time, said Josephthal's Rice.
Microsoft Corp. rose 66 cents to $66.13, helping both Nasdaq and Dow, after the Financial Times reported the software giant is determined to prevent AOL Time Warner from acquiring or buying a stake in AT&T Corp.' cable business. AOL added 16 cents to $45.30 and AT&T, a Dow stock, shed 32 cents to $20.16.
Top Nasdaq-traded tech names fell such as Web gear giant Cisco Systems Inc. , down 39 cents at $18.67, and Sun Microsytems, off 59 cents at $15.70. But helping keep a floor under the market were gains in other Big Tech names including Intel Corp. , the world's largest computer chip maker, up 4 cents to $29.26 and Dell Computer , up 28 cents at $27.74.
Some 80 percent of the Standard & Poor's 500 companies have posted their quarterly results so far, offering few hints of a pick-up in corporate earnings.
J.P. Morgan's Cliggott cut his 2001 year-end target for the S&P 500 to 1,100 from 1,200 — about 9 percent below current levels. Cliggott was the only major sell-side analyst to predict that the S&P 500, the benchmark for judging performance of professional investors and large-cap mutual funds, would end 2000 lower.
Among companies issuing results, energy trader and pipeline operator The Williams Cos. reported higher operating earnings for the second quarter, beating Street estimates, thanks to better refining margins and stronger natural gas prices. Shares rose 15 cents at $33.24.
Tyson Foods Inc. lost more than 5 percent after the largest U.S. poultry producer said quarterly earnings fell sharply, as expected, pressured by weak foreign currencies and promotional expenses in a tough market. Shares fell 53 cents at $9.87.
Desktop publishing software provider Adobe Systems dropped $2.15 to $40.91 after it said it should meet its earnings targets, but could take a hit on revenue because of weaker-than-expected conditions across its product lines.
Heavy Week of Economic Releases
Investors are girding for a packed U.S. economic calendar later this week, including data on personal spending, the manufacturing sector and the labor market that could cast more light on the murky economic picture — and the outlook for corporate profits.
Nearly 80 percent of the Standard & Poor's 500 companies have announced quarterly earnings so far. Of that total, 56 percent topped analysts' estimates and 14 percent missed forecasts, according to market research firm Thomson Financial/First Call, a slightly better performance than usual as analysts slashed estimates after a particularly harsh profit-warning season.
Analysts expect profits of S&P 500 companies to decline by 17.2 percent in the second quarter compared with year-ago levels, according to First Call. They see third-quarter profits shrinking 11.5 percent, but scraping out a gain of 0.9 percent in the fourth quarter, First Call said. Up until early last week, those same analysts had predicted growth of 1.9 percent in the fourth quarter.
Friday’s Trading Highlights
Technology stocks inched higher Friday as wireless company Qualcomm's forecast of better profits offset worries over job cuts at fiber-optics component maker JDS Uniphase amid huge losses, but blue chips slipped after a two-day winning streak.
The Dow Jones industrial average fell 38.96 points, or 0.37 percent, to end at 10,416.67. The broader Standard & Poor's 500 Index gained 2.89 points, or 0.24 percent, to 1,205.82. The technology-laced Nasdaq Composite Index advanced 6.11 points, or 0.30 percent, to 2,029.07.