The broad market tumbled to 5-year lows on Thursday as a flurry of dismal corporate earnings reports pummeled hopes company profits were on the mend.
Surprisingly weak reports from health products company Baxter International Inc. and others slammed stocks, disappointing investors after major market gauges had climbed a day earlier. On Wednesday, the blue-chip Dow Jones industrial average <.DJI> had snapped a seven-session losing streak.
"The lack of any positive news is derailing any sort of market gains," said Michael Palazzi, head of Nasdaq trading for SG Cowen. "The market is way beyond rhetoric and needs to see concrete hard evidence that earnings are improving."
A bullish call on Honeywell International Inc. and hints of an improving economy had helped underpin blue chips in morning trade, but the Dow average erased gains as investors' confidence slid.
"Some names are reporting positive numbers but others just aren't coming through. It just doesn't feel like this market wants to move higher and sentiment is still poor," said Anthony Iuliano, head equity trader for Glenmede Trust Co.
The Dow fell to its lowest close since September, dropping 132.99 points, or 1.56 percent, to 8,409.49, according to the latest available figures.
The broader Standard & Poor's 500 Index <.SPX> was down 24.48 points, or 2.7 percent, at 881.56 for its lowest close since June 1997. The technology-laced Nasdaq Composite Index <.IXIC> was down 40.30 points, or 2.88 percent, at 1,356.95. The Nasdaq also is floundering near a 5-year low.
Declining stocks trounced advancers by a ratio of 2 to 1 on the New York Stock Exchange, and by a margin of 11 to 5 on the Nasdaq. More than 1.72 billion shares changed hands on the Big Board and more than 1.80 billion shares on Nasdaq.
U.S. Treasuries rose as investors, concerned about corporate earnings and accounting practices, sought to reduce risk and find safety in government-backed securities.
Baxter was among the Big Board's most-active stocks, plunging $11.41, or 26 percent, to $32. The health products maker said second-quarter profit fell 21 percent after disappointing sales and a massive charge.
Siebel Systems Inc. sank $2.12, or 18 percent, to $9.61 after the No. 1 seller of sales and customer service software posted profits that fell a larger-than-expected 61 percent from last year and forecast lower results for the second half.
This week marks one of the most hectic periods of the second-quarter earnings season. By Friday, more than half the companies in the S&P 500 will have reported results.
Worries over the legitimacy of financial statements are still dogging the market. AOL Time Warner Inc. sagged 66 cents, or 5 percent, to $12.45 and was the Big Board's most-active stock after a report in the Washington Post accused the media giant of inflating revenue. AOL called the Post report "flawed" and "misleading."
After markets closed, AOL said Chief Operating Officer Robert Pittman, the man who had been chosen to revive the company's struggling online unit, had resigned and two veteran Time Warner executives have been promoted to the company's top ranks.
Eli Lilly and Co. sank $2.36 to $48.54. The drug giant posted a sharp drop in quarterly profit on plunging sales of its antidepressant Prozac. The company signaled manufacturing woes could extend into 2003, a blow analysts said could threaten launches of five new drugs.
Automatic Data Processing Inc. dropped $9.75, or 24 percent, to $31.60 after the No. 1 U.S. payroll-services company warned of slower profit growth ahead.
On the brighter side, International Business Machines Corp. perked up $1.56 to $72.25, wiping out earlier losses after the world's largest computer maker eked out a quarterly net profit.
Honeywell climbed 93 cents to $32.03 after UBS Warburg upgraded the company to "buy" from "hold," based on its valuation, a strong dividend yield and more realistic earnings forecasts.
The latest economic news was mixed. Jobless claims fell to their lowest level in 17 months, the Labor Department said, but less cheerful economic news emerged from the Philadelphia Federal Reserve and the private Conference Board.
The number of people applying for state unemployment insurance fell by 28,000 in the July 13 week to 379,000 -- the lowest level since mid-February 2001. The Philadelphia Fed said its business conditions index staged its sharpest drop since November last year, falling to 6.6 in July from 22.2 in June, and that its business outlook survey for the month was the lowest since December.
(China Daily July 19, 2002)
