Corporate Profit Outlook Saps Stocks

N E W  Y O R K, July 20, 2001 -- 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 marketas Wall Street wrapped up one of the busiest weeks forcorporate earnings reports with marquee names like top telecomequipment maker Nortel Networks and computermaker Gateway spreading more gloom.

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

Losing Week

About 46 percent of the companies in the S&P 500 have nowissued their results. Out of those, 61 percent have beatenestimates, 28 percent have matched forecasts, and the remaining12 percent have fallen short, according to ThomsonFinancial/First Call.

The technology-laced Nasdaq Composite Index lost17.22 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's500 Index slipped 4.17 points, or 0.34 percent, to1,210.85.

The market managed to claw its way back from the day'sworst levels as the session wore on, however, and many traderstook comfort in that the damage from the barrage of bleakforecasts was not more devastating.

"The positive was that the market didn't respondoverwhelmingly negatively to negative news," said PeterGottlieb, 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 2.7percent.

Downbeat Earnings Forecasts

Microsoft lost $3.39 $69.18, dragging heavily on both theblue-chip Dow and the Nasdaq indexes. The company posted aprofit that was within estimates, thanks to robust softwaresales, but warned revenue growth would slow in the currentquarter amid still-sluggish demand for personal computers.

Personal computer maker Gateway sank as low as $10.65, itslowest since September 1996, after it reported a loss, hit byflagging U.S. consumer sales, with no rebound in sight. Gatewayended 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 butsaid its financial health has improved. Nortel's U.S.-listedshares fell 21 cents to $7.54.

G7 Provides Hope

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

G7 leaders said the world economy was slowing more thanexpected but that sound policies and healthy fundamentals offera basis for strong growth. They also said U.S. growth hadslowed sharply, but long-term trends remained favorable.

"Anything that gives an official imprint to the signs thatwe've seen recently that the U.S. economy could be recoveringis welcomed by the market," said Milton Ezrati, senior economicstrategist at Lord Abbett & Co. "But the market has alsolearned to discount these statements as they usually tend to bepositive."

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

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

Arch Slammed

Investors also punished Arch Coal Inc. , whichslumped 16 percent, or $3.58 to $18.82. The nation's No. 2 coalcompany reported earnings that fell short of forecasts due tohigher 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 salesof its Vioxx arthritis treatment.

Network computer maker Sun Microsystems Inc. rose59 cents to $15.03. It posted its first loss since 1989 andsaid the economy was too unstable to make a precise predictionfor the current quarter. But the company met its own loweredquarterly operating profit target and showed a $200 millionuptick 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 earningsup sharply. Its results bested expectations and the companyraised its estimates for the rest of the year.

Thursday’s Highlights

Stocks ended higher Thursday, bolstered by rosier earningsfrom high-tech bellwether Nokia, themobile phone giant. But the market's strong early rally fizzledby the session's end amid nagging worries about corporateAmerica'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, at2,046.59, and the blue-chip Dow Jones industrial average rose 40.17 points, or 0.38 percent, to 10,610.00, while thebroader Standard & Poor's 500 Index added 7.31 points,or 0.61 percent, to 1,215.02.

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