In the Thick of It

Jul 18 2001

Deteriorating revenue and earnings outlooks from some of America's largest companies – AOL Time Warner, Intel and Tyco, to name a few – coupled with House testimony from Fed Chairman Alan Greenspan made for moody stock markets on Wednesday morning.

As of noon EDT, the Nasdaq composite had lost 39.73, or 1.92 percent, to 2027.59. It hit 2016.07 just after 10 a.m. The Dow Jones Industrial Average fell 67.67, or 0.64 percent, to 10538.72, as American Express, IBM and Disney dragged down the index. Still, the Dow had been down nearly twice that amount this morning before recovering.

The Standard & Poor's 500 lost 9.47, or 0.78 percent, to 1204.97. The Industry Standard 100 fell 12.85, or 3.44 percent, to 360.58.

"The period of sub-par economic performance … is not yet over," Greenspan told the House Financial Services Committee. "We are not free of the risk that economic weakness will be greater than currently anticipated, and require further policy response." The Federal Reserve Board has already cut interest rates six times this year, from 6.5 percent to 3.75 percent as of June 27.

Greenspan continued to allay fears that inflation might become a negative force on the road to economic recovery. Wednesday morning's release of the June consumer price index, rising at just 0.2 percent, helps reaffirm that stance. But countering that, in a way, is a reported rise in housing starts in June. Equity that could return to the market – either in the purchase of consumer goods or stock – is going straight into the ground, as U.S. consumers see more long-term equity in their houses than in their portfolios.

It's almost dizzying to consider all the earnings news that the market is digesting, tech and non-tech alike. There's Philip Morris and Kraft, United Airlines and US Airways, EMC and Veritas, AOL Time Warner and the New York Times Co., and scores more.

Leading PC chipmaker Intel was off 64 cents, or 2.14 percent, to $29.26. The company reported second-quarter numbers that were just ahead of expectations, but it lowered third-quarter earnings guidance and offered analysts a revenue range of $6.2 billion to $6.8 billion. Chip stocks were down on the announcement, with Advanced Micro Devices falling 7.6 percent and Motorola and Texas Instruments off nearly 2 percent.

Media conglomerate AOL Time Warner lost $3.60, or 7.3 percent, to $45.85. The company reported better-than-expected earnings, but its revenues disappointed. Disney fell 94 cents, or 3.3 percent, to $27.36. Viacom and Vivendi also declined.

Shares of Apple are down $4.35, or 17.3 percent, to $20.75. The company pulled down its full-year revenue forecast, even as it beat analysts' estimates for the just-concluded quarter. Dell fell 4.3 percent, and Compaq was down 2.5 percent ahead of IBM's earnings announcement this afternoon. Big Blue lost $2.90, or 2.67 percent, to $105.63.

Storage software player Veritas lost $12.03, or 23.9 percent, to $38.39. The company met expectations but said revenue growth for the year would be lower than expected. Storage hardware leader EMC also dropped $1.57, or 7.7 percent, to $18.82, after it offered no guidance on its quarterly earnings call. Other storage-related stocks are also falling. Brocade Communications was off $4.09, or 11 percent, to $33.01. Network Appliance dipped 75 cents, or 6.6 percent, to $10.65.

There were a few gainers out there, but just a few. RF Micro Devices gained $2.17, or 11.24 percent, to $21.48 on a slightly upbeat earnings announcement. AT&T Wireless gained 53 cents, or 3.3 percent, to $16.68 on the news that it has successfully launched a next-generation wireless network in Seattle.

Both J.P. Morgan Chase and Fleet Boston were up more than 2 percent after their earnings calls.

Other stocks on the slide were Cisco, down 4.4 percent; Siebel Systems, down 16.8 percent; BEA Systems, down 9.9 percent; and VeriSign, down 10.6 percent. Microsoft lost 1.5 percent after the Wall Street Journal reported that Redmond is pulling support for Java from Windows XP. Sun Microsystems, the keeper of the Java programming language, lost 3.5 percent.

Lucent, Global Crossing and Nortel were falling on the Big Board.

Companies set to release earnings after the bell on Wednesday include Applied Micro Circuits, Broadcom, E-Trade, Sanmina, Travlocity and, of course, IBM.