Disappointing corporate news continues to frustrate Wall Street

Posted 8:54AM on Friday 26th April 2002 ( 23 years ago )

NEW YORK - A change in business strategy at Tyco and lackluster earnings at other companies stymied Wall Street Thursday and left stocks barely changed following some wide price swings. The Dow Jones industrials dipped below the 10,000 level for the first time in two months before recovering in late trading. Analysts said the market, which had bet that earnings would be strong enough to trigger a market turnaround, was resigning itself to the likelihood that 2002's recovery will be less robust than hoped. Still, a last-minute surge of buying saved the market from extending what had been a weeklong downturn. "The path of least resistance right now is still down," said Christopher Wolfe, equity market strategist for J.P. Morgan Private Bank. "There's not a lot of catalysts, not a lot of expectations that the market's going to go up anytime soon." The Dow closed up 4.63, virtually unchanged, at 10,035.06, according to preliminary calculations, despite spending most of the session below 10,000 and falling as much as 103 points early in the session. The index last closed below the psychologically important level on Feb. 22, when it stood at 9,968.15. Broader stock indicators also showed little change by the end of the day. The Nasdaq composite index rose 0.36 to 1,713.70, just enough to end a six-session losing streak. The Standard & Poor's 500 index lost 1.66, or 0.2 percent, to close at 1,091.48. Tyco fell $5.15, or 19.9 percent, to $20.75 after the conglomerate backed away from plans to split the company into four parts and announced it would close 24 factories and eliminate 7,100 jobs, primarily in its electronics and telecommunications businesses. General Mills fell $3.77, or 7.7 percent, to $45.30 on reports that the food company had canceled a meeting with investors. Dow Jones News reported that the meeting, which was said to have involved Goldman Sachs, was originally scheduled for Friday. A spate of mediocre earnings reports exacerbated Wall Street's moodiness. Investors bid Dow Chemical down 30 cents to $30.70 on lower than expected first-quarter estimates. Eastman Kodak dropped 76 cents to $33.18 after posting a 74-percent drop in first-quarter profits and beating Wall Street's lowered forecasts. And Dynegy plunged $8.10 to $19.20, a 29.7 percent loss, after the energy company reduced its earnings forecast and disclosed government regulators were looking into a gas contract. Stocks have been losing ground for weeks as investors digested first-quarter earnings reports that have mostly met previously reduced expectations but failed to forecast any significant improvement ahead. Thursday's trading reflected frustration over businesses' inability to conclusively state business is improving and that higher stock prices are ahead. Until outlooks become more bullish, investors will have little incentive to buy. "There's nothing in this market that an investor can really grab hold of and feel like they can pound the table with any certainty about a particular investment or trend," said Charles White, portfolio manager at Avatar Associates. "The lack of persistent leadership makes it very frustrating." Also Thursday, the Labor Department reported U.S. workers' wages and benefits grew in the first quarter at the slowest rate in three years - a reflection of the effect the sluggish economy has had on employee pay. Another report showed fewer Americans filed new claims for state unemployment benefits last week, suggesting some laid-off workers are finding jobs. The market had little reaction to the numbers. Analysts say that although economic data is steadily improving, investors want to see profits or forecasts for profits increase - something that was supposed to happen this month as companies released first-quarter reports. Advancing and declining issues traded nearly evenly on the New York Stock Exchange. Volume came to 1.51 billion shares, compared with 1.35 billion shares Wednesday. The Russell 2000 index gained 1.53 to 508.85. Overseas, Japan's Nikkei stock average lost 0.2 percent. In Europe, Germany's DAX index dropped 2.1 percent, Britain's FT-SE 100 slipped 0.4 percent, and France's CAC-40 fell 1.6 percent.

http://accesswdun.com/article/2002/4/195479