Bad Earnings News Taking Its Toll

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The quality of mercy is not strain'd,/It droppeth as the gentle rain from heaven

... and it has absolutely nothing to do with Wall Street. Just ask

Rainforest Cafe

(RAIN)

.

The "Wild Place to Shop and Eat" chain is getting killed in today's trading, down 12 1/8, or 39.7%, to 18 7/16 after late

yesterday warning that it expects to miss fourth-quarter earnings estimates by a penny or two per share. A tiny little miss like that surely calls for mercy, right? Wrong, according to the Darwinistic paradigm of trading.

Rainforest Cafe's problem goes beyond that relatively small projected shortfall. The company said its three units open more than 18 months saw fourth-quarter same-store sales decline 11% -- not the kind of news that indicates a smooth transition from "splashy new place to try out once" to "repeat-business-generating institution."

It is, however, the kind of news that makes brokerages abandon their rosy outlooks and slash ratings.

Morgan Stanley Dean Witter

downgraded Rainforest Cafe to neutral from strong buy, as did

John G. Kinnard

, and

Dain Rauscher

cut the stock to neutral from buy.

Rainforest, today's second-largest percentage loser on the

Nasdaq Stock Market

, is hardly alone in suffering investors' wrath after previewing poor results.

Teledata

(TLDCF)

led the percentage-loss list, off 8 3/16, or 40.8%, to 11 15/16 after warning of lower-than-expected first-quarter revenue and earnings. Also hurt on warnings were

MetaCreations

(MCRE)

, down 3 5/16, or 33.8%, to 6 5/8;

Gargoyles

(GOYL)

, down 1 1/8, or 28.1%, to 2 15/16;

Protocol Systems

(PCOL)

, down 2 5/16, or 24.8%, to 7,

Track n' Trail

(TKTL)

, down 1 1/2, or 20.7%, to 5 7/8;

Atmel

(ATML)

, down 3 5/16, or 17.1%, to 16 1/8; and

Seer Technologies

(SEER)

, down 3/4, or 16.7%, to 3 7/8.

Nor are earnings warnings the only element of downward pressure. "The problem that started yesterday and continues today is the banks and the oils, particularly the banks today," said Jay Meagrow, vice president of sales and trading at

McDonald

in Cleveland. He said banks are being hurt by concerns about a wave of debt refinancings, spurred by the recent dive in interest rates, and oil issues are suffering from the continuing slide in crude oil prices. (For a review of that group, click

here.)

At midday,

Citicorp

(CCI) - Get Report

was down 3 7/8 to 119 1/16,

Chase

(CMB)

was down 2 9/16 to 104 5/8 and

BankAmerica

(BAC) - Get Report

was down 2 15/16 to 66 3/16. In the oil patch, however, many stocks are enjoying a bounce from yesterday's weakness.

Chevron

(CHV)

was up 5/8 to 74 1/4,

Exxon

(XON) - Get Report

was up 9/16 to 59 9/16 and

Atlantic Richfield

(ARC) - Get Report

was up 11/16 to 75.

The major equity indices, meanwhile, were seeing their losses accelerate and deepen at midday. Around 12:20 p.m. EST the

Dow Jones Industrial Average

was down 103 to 7803, the

S&P 500

was down 11 to 955, the

Nasdaq Composite Index

was down 27 to 1553 and the

Russell 2000

was down almost 5 to 428. The benchmark 30-year Treasury bond was off 23/32 to 105 1/32 in price, its yield rising to 5.77%.