Market Update: Indices Smacked Around by Nokia's Announcement

Stocks tumble after the mobile-phone maker's warning this morning. The Nasdaq falls 2.5%; the Dow loses 1%.
By Diane Hess ,

(Updated from 11:20 a.m.)

Investors were hanging up on the market after this morning's surprise profit warning from mobile-phone maker

Nokia

(NOK) - Get Report

.

The

Nasdaq Composite Index was recently down 54.5 points, or 2.5%, to 2116. Today's losses add to a 2% drop in the tech-heavy average yesterday. Nokia was falling 19.8% to $23.04, and the company's main competitors were tumbling alongside it.

Ericsson

(ERICY)

was losing 5.6% to $5.19, while

Motorola

(MOT)

was sliding 8.3% to $13.63.

Nokia, which had been considered a safe haven in technology, said it expects the global mobile-phone market to show only

"very modest growth" this year. The Finnish cell-phone company also said weaker market conditions will hurt its financial performance during the second quarter.

"The market has been afraid of a parade of profit warnings," said Todd Clark, head of listed trading at

W.R. Hambrecht

. "Nokia's warning that it doesn't see light at the end of the tunnel means that the possibility of discounting growth in the second half of the year needs to be thrown out the window."

Over the past two days, stocks have fallen, spurred by profit warnings from a wide swath of corporate America. Investors, who sent stocks up significantly in April based on hopes the economy was recovering, are now worried that a second-half turnaround is increasingly unlikely.

Technology weakness was also putting a drag on the

Dow Jones Industrial Average, which was lately down about 107, or 1%, to 10,815. Chipmaker

Intel

(INTC) - Get Report

was off 3.8% to $29.17.

Honeywell

(HON) - Get Report

was slumping 6.3% to $42.40, making it the weakest link on the Dow. Yesterday,

General Electric's

(GE) - Get Report

planned acquisition of the company ran into obstacles with regulators in Europe.

But all news wasn't gloomy in the market.

Dell

(DELL) - Get Report

was

upgraded to outperform from neutral by

Morgan Stanley Dean Witter

. Even so, the stock was lately trading down 0.8% to $25.07. And

Kraft

raised the price range for its

IPO, which is scheduled for Wednesday. Tobacco giant

Philip Morris

(MO) - Get Report

will let go of a 16% stake in the food giant. At the top end of the new range, the IPO would bring Philip Morris $9.03 billion, which will be used to pay down the company's debt. Philip Morris was lately up 1.2% to $49.12.

Fasten Seatbelts

But the news driving trading today is overwhelmingly negative. The

Federal Drug Administration

this morning denied approval for a joint prostate cancer treatment

Amgen

(AMGN) - Get Report

and

Praecis

(PRCS)

. Praecis was diving 33.6% to $15, while Amgen was losing 2.7% to $64.96.

And a round of profit warnings hit Wall Street last night. Genetic technology company

Affymetrix

(AFFX)

said it would

fall short of Wall Street estimates for the second quarter, citing slower-than-expected sales. And

Hughes Electronics

(GMH)

, the company behind the

DirecTV

home satellite services, said it would

miss forecasts for subscriber growth in the second quarter and the rest of the year. Affymetrix was lately down 33.9% to $27.09; Hughes was off 11.7% to $19.95.

So far, this quarter's confession season has been mostly negative. Wall Street awaits the Federal Reserve's next policy meeting on June 26 and 27, when the central bank is expected to cut short-term interest rates by an additional quarter of a percentage point. But investors expect the Fed may be finished with its reduction after that meeting since it has cut the

fed funds rate by 2.5 percentage points since the beginning of the year.

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