Stocks fell today, pushing the Standard & Poor's 500 index back into bear market territory, as investors offloaded shares following bleak earnings from computer giant Compaq Computer Corp. and others.
The selling intensified late in the day and erased an early rally spurred by investors' snatching up beaten-down stocks in the hope the U.S. economy will pick up after a series of interest-rate cuts by the Federal Reserve.
Stocks rallied this month on mounting hopes the market, which has been badly beaten over the last year, already reflects slower corporate earnings growth. But a tumble in a key barometer of consumer confidence and a procession of dour earnings from high-tech bellwethers kept optimism in check on Tuesday.
"All the statistics that come out are a bit of a double-edged sword," said Richard Babson, president of Babson-United Investment Advisors Inc, which manages $1.8 billion. "If consumer confidence is down, then may be the Fed will cut rates more at the May meeting, but if the Fed is cutting more it's because earnings look bleak and there is continued deterioration in corporate balance sheets."
The tech-laden Nasdaq Composite Index fell 42.71 points, or 2.07 percent, to 2,016.61 after rising almost 2 percent. JDS Uniphase Corp. , down 13.8 percent, was among the most heavily traded stock on the Nasdaq after the fiber optics parts maker reported disappointing financial results.
The blue chip Dow Jones industrial average lost 77.89 points, or 0.74 percent, at 10,454.34.
The S&P 500 shed 14.89 points, or 1.22 percent, at 1,209.47. That put the the broad market gauge back in bear market territory as defined by a drop of 20 percent or more from a peak. The index exited bear market territory last week when the Fed surprised markets with a fourth rate cut this year.
"What we are seeing, and will continue to see, is some of this 'push me, pull you' in the market," Babson said.
Compaq fell more than 15 percent, or $3.15 to $17.50, on the New York Stock Exchange. The computer giant late Monday posted lower profits as it battled soft sales and price cuts by rivals such as Dell Computer Corp..
The S&P computer hardware gauge eased 4 percent, reflecting losses in Compaq, Dell, down $3.50 at $25.85 on Nasdaq, and other computer makers.
A key gauge in consumer confidence fell sharply in April because of deteriorating business conditions and fears about job security, the Conference Board's Consumer Confidence Index showed. The broad gauge of consumer attitudes fell to 109.2 from a downwardly revised March reading of 116.9, its sixth tumble in seven months. Consensus forecasts were for a fall to 112.0.
"Consumer confidence was weaker than expected," said Barry Berman, managing director of equity trading at Robert W. Baird & Co. "But it may give the Fed more reason to cut rates at the next (policy-setting) meeting."
Investors have been scouring corporate earnings for any hint the economy is turning around, but lackluster earnings continued to rain down on Wall Street.
JDS Uniphase fell $3.34 at $20.84 after it posted a $1.3 billion loss, and said it would slash 5,000 jobs, or 20 percent of its work force, to cut costs in the slowing economy.
Check Point Software Technologies Ltd. reported earnings that beat expectations but saw its shares fall more than 14 percent amid investor worries about sluggish technology spending. Check Point closed down $10.38 at $62.01.
Intel Corp. shed $1.18 at $29.14. Intel agreed to buy three privately held companies that make components for optical networking equipment as the No.1 chipmaker continues its push into new markets beyond its bread-and-butter microprocessor business.
The Philadelphia semiconductor index lost 2.47 percent amid losses by other sectoral firms including Applied Materials. Orders for gear from North American-based chip-equipment companies fell 23 percent in March from the previous month amid a continued slump in the semiconductor industry, a trade group said late on Monday.
Telephone and cable television giant AT&T Corp. nosed up 14 cents to $22.12, although the Dow component posted a loss on stiff competition and weak prices, and warned its second-quarter earnings will be below current expectations.
Another Dow company, DuPont Co., the No. 1 U.S. chemical company, said earnings dropped sharply because of a slowing economy, high raw material costs, and poor results from its drugs unit. Its shares however rose 67 cents at $44.80.
Struggling telecommunications equipment giant Lucent Technologies Inc. jumped $1.05 to $10.25. The company said its results dropped due to a slowdown in customer spending and the company's restructuring. Brokerage Salomon Smith Barney, however, raised its investment rating on the company.