Stocks ended lower today, but a late afternoon comeback limited losses after Federal Reserve Chairman Alan Greenspan offered too few soothing words about America's sputtering economy, noting in congressional testimony more weakness cannot be ruled out.
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Greenspan said in testimony before Congress there are signs the U.S. economy is escaping its year-long slump, but cautioned that it is not out of the woods yet. His comments unnerved investors who were already reeling from bleak earnings results and forecasts.
Computer chip giant Intel and software provider Veritas Software both unleashed pessimistic future estimates, while financial services behemoth American Express slammed the Street with news of massive layoffs and charges against earnings.
"Days like this remind us that there's blood in the streets when it comes to corporate profits," said David Sowerby, market strategist for Loomis Sayles in Detroit. "We're in a profit recession, and it's not going to end. It's got another quarter, maybe two quarters, of life left."
After the closing bell, computer heavyweight International Business Machines offered a ray of hope when it met analysts' estimates with a higher quarterly profit. IBM shares ended at $104.28, down $4.25.
The tech-laced Nasdaq Composite Index finished with a loss of 51.15 points, or 2.47 percent, at 2,016.17, after diving more than 3 percent at mid-afternoon.
The blue-chip Dow Jones industrial average fell 36.56 points, or 0.34 percent, to 10,569.83 — marking a substantial recovery from its earlier loss of 122 points.
The broader Standard & Poor's 500 Index shed 6.73 points, or 0.55 percent, to 1,207.71, after falling more than 15 points during the session.
The Greenspan Effect
The U.S. economy faces a range of hurdles that could imperil a hoped-for rebound and force the Fed to cut rates further, Greenspan said.
But he told the House Financial Services Committee six rate cuts so far this year, plus a tax cut and cheaper energy, should assist the economy as it tries to pull out of its slump later this year.
He added that there are signs the slowdown is beginning to bottom out, but it was still tentative and "clearly the risks … are toward economic weakness."
Corporate News Weighs Markets Down
The most active stock on the New York Stock Exchange was AOL Time Warner, off a hefty $4.90 at $44.55. The world's largest Internet and media company said quarterly earnings, excluding items, rose as it cut costs. But concerns about revenue growth sparked the drop in its stock.
Just a day ago, investors had looked past dreary quarterly earnings reports and focused on upbeat forecasts instead as some companies' weak results still met or beat estimates.
But the party was spoiled by a host of companies, particularly from the high-tech sector, that added to the chorus of corporate voices chanting that the slowing economic environment has hurt their results. Among them was EMC, the No. 1 data-storage systems maker.
EMC, down $2.34 at $18.05, said its profits could take an even bigger hit in the current quarter than the second quarter's 75 percent drop. EMC also said the speed and depth of deterioration in the global economy has hurt its ability to make a near-term forecast. EMC shares hit a 52-week low of $18.05.
The news rippled through the data networking community, hitting industry peers such as Brocade Communications, which fell $6.96 to $30.14.
Techs Take a Tumble
Intel fell $1.01 to $28.89 after it reported profits sank 76 percent as the world's largest semiconductor maker was hit by a slowing economy, slack PC sales and a stinging price war. The Philadelphia Stock Exchange's semicondutor index fell 3.35 percent.
Apple Computer closed down $4.31 at $20.79, after the computer maker raised the possibility that revenue for the second half of its fiscal year could fall short of its earlier forecast.
Veritas met the Street's earnings estimate, but cut its annual growth target amid a prolonged slump in U.S. corporate technology spending. Investors were shocked by the warning, which came just 12 days after company executives reiterated previous guidance. Shares sank a whopping $13.34 to $37.08 and sector companies were hit, including Siebel Systems , down $5.91 at $37.64.
"You're waiting for the turn for so long and want to believe it's coming, and just when you start to get some evidence it is, you get contrary evidence — it wears on the psychology and the psyche of investors," said Charles White, president of investment firm Avatar Associates.
About half of the Dow's 30 components will issue their results this week. Among them was Boeing Co. , which added 83 cents to end at $57.13. The aerospace giant said profits before extraordinary items rose 27 percent on steady improvement in its core businesses. Boeing raised its forecast for revenues in 2001 by $1 billion.
AMR, whose American Airlines is the world's largest airline, reported a loss, blaming flagging business travel and high fuel costs. Shares fell 96 cents to $35.44.
So far, more than a quarter of the companies in the S&P 500 have reported earnings. Of those 144 companies, 63 percent have come in above expectations, 25 percent have met forecasts, and 12 percent have disappointed, according to Thomson Financial/First Call.
On Tuesday, the blue-chip Dow Jones industrial average jumped 134.27 points, or 1.28 percent, to 10,606.39, to close at its highest level in nearly a month. About half of the Dow's 30 components are set to report earnings this week.
The broad Standard & Poor's 500 Index climbed 11.99 points, or 1 percent, to 1,214.44. The tech-laced Nasdaq Composite Index rose 38.20 points, or 1.88 percent, to 2,067.32, snapping back after Monday's hefty 2.67 percent slide.
The Associated Press and Reuters contributed to this report