Markets: Analysts Crush Turnaround Hopes

N E W  Y O R K, July 30, 2001 -- Stocks were down inlackluster late afternoon trade as three top guruscut their 2001 earnings estimates for a broad market barometer,underscoring investors' worries over corporate profits in asluggish economy.

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A dearth of economic data or key corporate earnings reportskept investors on the sidelines, making the trading sessionamong the lightest of the year.

"We are very rangebound until we get some significant goodnews," said Arthur Hogan, chief market analyst at Jefferies &Co.

The blue-chip Dow Jones industrial average slipped14.95 points, or 0.14 percent, to 10,401.72. The broad Standard& Poor's 500 Index was little changed, dipping 1.30points, or 0.11 percent, to 1,204.52. The tech-laced NasdaqComposite Index fell 11.25 points, or 0.55 percent, to2,017.82.

About 1.33 billion shares traded on the Nasdaq StockMarket, according to preliminary figures, making it thefourth-lightest session of the year.

Cuts Hurt

A very cautious approach to the U.S. equity market "makes alot of sense" until there are unambiguous signs of a realearnings recovery, J.P. Morgan Chase & Co.'s chief portfoliostrategist, Doug Cliggott, told clients in a note that cut hisoutlook for the S&P 500.

UBS Warburg's Ed Kerschner and Credit Suisse First Boston'sTom Galvin also trimmed their 2001 outlooks for the S&P 500.

Trading Highlights

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 activeissue while GE was the most active.

Diversified industrial group Minnesota Mining andManufacturing Co. , a Dow component, lost $2.10 to$109.38.

Investors are waiting for signs that the Federal Reserve'ssix interest-rate cuts this year are adding momentum to thenation's sluggish economy. The central bank meets on Aug. 21,when it is widely expected to cut rates for the seventh timethis year in a bid to revitalize the world's largest economy.

Until then, the market will mostly mark time, saidJosephthal's Rice.

Microsoft Corp. rose 66 cents to $66.13, helpingboth Nasdaq and Dow, after the Financial Times reported thesoftware giant is determined to prevent AOL Time Warnerfrom acquiring or buying a stake in AT&T Corp.' cablebusiness. 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 giantCisco Systems Inc. , down 39 cents at $18.67, and Sun Microsytems, off 59 cents at $15.70. But helpingkeep a floor under the market were gains in other Big Technames including Intel Corp. , the world's largestcomputer 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 haveposted their quarterly results so far, offering few hints of apick-up in corporate earnings.

J.P. Morgan's Cliggott cut his 2001 year-end target for theS&P 500 to 1,100 from 1,200 — about 9 percent below currentlevels. Cliggott was the only major sell-side analyst topredict that the S&P 500, the benchmark for judging performanceof professional investors and large-cap mutual funds, would end2000 lower.

Among companies issuing results, energy trader and pipelineoperator The Williams Cos. reported higher operatingearnings for the second quarter, beating Street estimates,thanks to better refining margins and stronger natural gasprices. Shares rose 15 cents at $33.24.

Tyson Foods Inc. lost more than 5 percent after thelargest U.S. poultry producer said quarterly earnings fellsharply, as expected, pressured by weak foreign currencies andpromotional 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 meetits earnings targets, but could take a hit on revenue becauseof weaker-than-expected conditions across its product lines.

Heavy Week of Economic Releases

Investors are girding for a packed U.S. economic calendarlater this week, including data on personal spending, themanufacturing sector and the labor market that could cast morelight on the murky economic picture — and the outlook forcorporate profits.

Nearly 80 percent of the Standard & Poor's 500 companieshave announced quarterly earnings so far. Of that total, 56percent topped analysts' estimates and 14 percent missedforecasts, according to market research firm ThomsonFinancial/First Call, a slightly better performance than usualas analysts slashed estimates after a particularly harshprofit-warning season.

Analysts expect profits of S&P 500 companies to decline by17.2 percent in the second quarter compared with year-agolevels, according to First Call. They see third-quarter profitsshrinking 11.5 percent, but scraping out a gain of 0.9 percentin the fourth quarter, First Call said. Up until early lastweek, those same analysts had predicted growth of 1.9 percentin the fourth quarter.

Friday’s Trading Highlights

Technology stocks inched higher Friday as wirelesscompany Qualcomm's forecast of better profitsoffset worries over job cuts at fiber-optics component makerJDS Uniphase amid huge losses, but blue chipsslipped 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, to1,205.82. The technology-laced Nasdaq Composite Index advanced 6.11 points, or 0.30 percent, to 2,029.07.

The Associated Press and Reuters contributed to this report-->