Stocks slide as investors take profits after rally

Earnings reports help spur drops of 104 for Nasdaq, 47 for Dow

April 24, 2001

NEW YORK - Amid fresh reminders that companies are still struggling in a weak economy, investors took profits yesterday, locking in gains after the stock market's two-week rally.

Among the big losers were companies that released disappointing earnings and acknowledged future challenges, and companies that were downgraded by brokerages.

Analysts had expected a pullback after the Dow industrials and the Nasdaq composite index ended last week with triple-digit advances.

"Actually, it is healthy if the market backs and fills, rather than going up like there is no tomorrow," said Dan Ascani, president and research director at Global Market Strategists in Gainesville, Ga.

The Dow lost 47.62 to close at 10,532.23. The blue chips sacrificed about one-tenth of the 452 points they picked up last week, when several companies posted better-than-expected earnings and the Federal Reserve unexpectedly cut interest rates for the fourth time this year.

The Nasdaq composite index fell 104.09 to 2,059.32, losing more than half of last week's 201-point advance. However, the index has gained strength recently, recovering nearly 26 percent from its low close for the year of 1,638.80, reached April 4.

The market's broader index, the Standard & Poor's 500, slipped 18.62 to close at 1,224.36. Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, fell 5.64 to 461.07 and the Wilshire 5000 total market index dropped 184.80 to 11,224.90.

The Sun-Bloomberg index of the top stocks in Maryland slipped 4.18 to 202.89, led by Ciena Corp., which fell $7.41 to $59.68, and Human Genome Sciences Inc., which dropped $4.61 to $55.34.

Companies with negative earnings news traded lower yesterday.

Compaq Computer, which reported after the market closed that it missed earnings forecasts and warned that the second-quarter will also be tough, fell 65 cents in extended trading. That compounded its 86-cent loss in the regular session, during which Compaq closed at $20.65.

Analysts' downgrades also weighed on technology stocks. Software maker Oracle fell $2.60 to $17.15 after Lehman Brothers reduced its rating on the stock and warned of a weak fourth quarter for the company.

Semiconductor stocks fell after Merrill Lynch downgraded many companies in the sector, including PMC-Sierra and Intel. PMC-Sierra plunged $6.05 to $38.76. Intel, which rose sharply last week on better-than-anticipated earnings and an announcement that sales had stabilized, dropped $2.11 to $30.32.

According to a research note by Merrill Lynch analyst Joseph Osha, the semiconductor sector is overvalued, up 36 percent in the past two weeks. Osha also said, "We would also add that there is no identifiable evidence that the semiconductor recovery is closer at hand."

Noting the recent big advance in the technology sector, analysts weren't surprised that stocks fell. "The tech stocks have moved ahead quite significantly, but let's face it, people have been hurt so badly and lost so much money by the decline that there is a natural tendency to take profits," said Jack Shaughnessy, chief investment strategist for Advest Inc. in Hartford, Conn.

Investors rewarded companies that beat lowered earnings expectations. Exxon Mobil advanced $2.83 to $88 after announcing its earnings were 9 cents a share above expectations. Pepsico rose $1.01 to $42.27 on news that it earned 34 cents a share and is confident that it will meet year-end sales and growth targets.

Declining issues outnumbered advancers more than 3-to-2 on the New York Stock Exchange where consolidated volume was to 1.22 billion, down from 1.57 billion Friday.

Stocks also fell overseas yesterday. Japan's Nikkei stock average finished the day down 0.4 percent. Germany's DAX index fell 1.1 percent, Britain's FTSE 100 slipped 0.1 percent, and France's CAC-40 declined 1.0 percent.

Bloomberg News contributed to this article.

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