Corporate Profit Outlook Saps Stocks

Stocks slipped today as the mood again soured on corporate earnings after software giant Microsoft warned of slowing growth.

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The drone of downbeat news reverberated through the market as Wall Street wrapped up one of the busiest weeks for corporate earnings reports with marquee names like top telecom equipment maker Nortel Networks and computer maker Gateway spreading more gloom.

"Depressed, disappointed, disenchanted — those are all good words to describe how investors are probably feeling right now about the market," said Charles Payne, analyst at Wall Street Strategies. "It seems that no company is safe in terms of being blown out of the water and … there doesn't seem to be any news on the horizon that will take stocks higher."

Losing Week

About 46 percent of the companies in the S&P 500 have now issued their results. Out of those, 61 percent have beaten estimates, 28 percent have matched forecasts, and the remaining 12 percent have fallen short, according to Thomson Financial/First Call.

The technology-laced Nasdaq Composite Index lost 17.22 points, or 0.84 percent, to close at 2,029.37.

The Dow Jones industrial average fell 33.35 points, or 0.31 percent, to 10,576.65, and the broad Standard & Poor's 500 Index slipped 4.17 points, or 0.34 percent, to 1,210.85.

The market managed to claw its way back from the day's worst levels as the session wore on, however, and many traders took comfort in that the damage from the barrage of bleak forecasts was not more devastating.

"The positive was that the market didn't respond overwhelmingly negatively to negative news," said Peter Gottlieb, portfolio manager at First Albany Asset Management.

For the week, the Dow finished with a gain of 0.4 percent, while the S&P 500 slipped 0.4 percent, and the Nasdaq fell 2.7 percent.

Downbeat Earnings Forecasts

Microsoft lost $3.39 $69.18, dragging heavily on both the blue-chip Dow and the Nasdaq indexes. The company posted a profit that was within estimates, thanks to robust software sales, but warned revenue growth would slow in the current quarter amid still-sluggish demand for personal computers.

Personal computer maker Gateway sank as low as $10.65, its lowest since September 1996, after it reported a loss, hit by flagging U.S. consumer sales, with no rebound in sight. Gateway ended with down $3.60 at $10.99.

Nortel Networks of Canada reported a whopping loss of $19.4 billion as sales sank. It did not give a forecast but said its financial health has improved. Nortel's U.S.-listed shares fell 21 cents to $7.54.

G7 Provides Hope

Investors also eyed a number of upbeat statements from the Group of Seven nations meeting in Genoa, Italy.

G7 leaders said the world economy was slowing more than expected but that sound policies and healthy fundamentals offer a basis for strong growth. They also said U.S. growth had slowed sharply, but long-term trends remained favorable.

"Anything that gives an official imprint to the signs that we've seen recently that the U.S. economy could be recovering is welcomed by the market," said Milton Ezrati, senior economic strategist at Lord Abbett & Co. "But the market has also learned to discount these statements as they usually tend to be positive."

Earnings hogged the spotlight, however, and more bad news came from Scientific-Atlanta Inc., which said its revenues missed forecasts because of slowing sales of its digital set-top box units. The stock tumbled 35 percent, or $12.28, to $22.80 and was among the most heavily traded on the New York Stock Exchange.

Vitesse Semiconductor Corp. shed 73 cents to $17.94. The communications chip maker reported a loss of $69.6 million, blaming order cancellations and weaker demand for electronics.

Arch Slammed

Investors also punished Arch Coal Inc. , which slumped 16 percent, or $3.58 to $18.82. The nation's No. 2 coal company reported earnings that fell short of forecasts due to higher operating costs.

Dow component Merck & Co. Inc. lost 87 cents to $66.43. The leading drugmaker said profits were up 5 percent. This, however, was slower than earnings in earlier quarters, and the company blamed the shortfall partly on sluggish sales of its Vioxx arthritis treatment.

Network computer maker Sun Microsystems Inc. rose 59 cents to $15.03. It posted its first loss since 1989 and said the economy was too unstable to make a precise prediction for the current quarter. But the company met its own lowered quarterly operating profit target and showed a $200 million uptick in U.S. sales from three months earlier.

Online auction site eBay Inc. added $2.40 to $66.80 after posting a stellar quarter with sales and earnings up sharply. Its results bested expectations and the company raised its estimates for the rest of the year.

Thursday’s Highlights

Stocks ended higher Thursday, bolstered by rosier earnings from high-tech bellwether Nokia, the mobile phone giant. But the market's strong early rally fizzled by the session's end amid nagging worries about corporate America's failing health and soft economic growth.

The tech-laced Nasdaq Composite Index finished with a gain of 30.42 points, or 1.51 percent, at 2,046.59, and the blue-chip Dow Jones industrial average rose 40.17 points, or 0.38 percent, to 10,610.00, while the broader Standard & Poor's 500 Index added 7.31 points, or 0.61 percent, to 1,215.02.