Market Update: No Relief for Pummeled Stocks at Midafternoon
Stocks were under pressure as earning jitters outweighed any relief from friendly economic data.
This morning's release of a fairly friendly September
jobs report gave a minimal bounce to the market before the reality of earnings warnings set in and quickly pulled down most major indices.
Both the
Nasdaq Composite Index and the
Dow Jones Industrial Average were lately in triple-digit loss territory.
Rumors were flying on financial desks that an investment bank is getting set to reveal major trading losses from high-yield bonds.
Morgan Stanley Dean Witter's
name keeps surfacing in the buzz about substantial losses. This afternoon the firm issued a press release categorically denying the losses.
The speculation damaged the financial sector, with brokerages taking it on the chin. The
American Stock Exchange Broker/Dealer
index was lately off 5.4%.
Earnings warnings are also weighing heavily on stocks today. Last night there were a flurry of tech sector warnings.
Companies warning last night included Web site designer
Razorfish
(RAZF)
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, data storage and imaging systems manufacturer
Imation
(IMN)
, Internet-based software firm
Marimba
(MRBA)
and e-commerce software provider
Concord Communications
(CCRD) - Get CoreCard Corporation Report
.
Concord Communications had lost 58% by midafternoon.
Other big tech losers for the day included data storage and optical networking firm
Veeco
(VECO) - Get Veeco Instruments Inc. Report
, which warned of lower-than-expected third-quarter sales and earnings last night and announced the resignation of its president and chief operating officer this morning. The company's stock was getting slaughtered, off 34.4%.
Tech bellwethers like
Intel
(INTC) - Get Intel Corporation Report
,
Cisco
(CSCO) - Get Cisco Systems Inc. Report
,
Qualcomm
(QCOM) - Get QUALCOMM Incorporated Report
and
Yahoo!
(YHOO)
were adding pressure to the Comp.
The Dow was struggling most under the weight of
J.P. Morgan
(JPM) - Get JP Morgan Chase & Co. Report
,
Home Depot
(HD) - Get Home Depot Inc. (The) Report
and and
Citigroup
(C) - Get Citigroup Inc. Report
, which accounted for about 75 points of downside.
Traders said the market probably won't regain any uphill stride until the earnings warnings flow dries up, oil prices show a steady drop and companies begin to report solid third-quarter earnings and positive outlooks for coming quarters. (Earnings season will start to pick up next week.)
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Sector Watch
Energy stocks got a lift from a rebound in oil prices early on but had lately fallen back. Oil prices were clawing their way back up after falling sharply Thursday on
news that the government had awarded contracts for all 30 million barrels of stockpiled crude oil offered to the refineries. The
American Stock Exchange Oil & Gas Index
was off 0.4%, while the
American Stock Exchange Natural Gas Index
was higher by 0.7%.
Financials were tanking today. In addition to the 5% loss in the American Stock Exchange Broker/Dealer Index, the
Philadelphia Stock Exchange/KBW Bank Index
was down 4.1%.
The
Philadelphia Stock Exchange Semiconductor Index
lost 3.7%. The sector can thank
Veeco Instruments
(VECO) - Get Veeco Instruments Inc. Report
for that one. It warned of lower-than-expected sales and earnings.
The
S&P Retail Index
fell 2.9%. The
Nasdaq Biotechnology Index
was down 3.4%.
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Bonds/Economy
Bonds have recovered to post significant gains thanks to the weakness in stocks. Falling stock prices are seen as a leading indicator of economic activity. They also make bonds more appealing as an alternative investment.
Earlier, bond prices fell as investors concluded that the September
employment report
(
definition |
chart |
) makes the
Fed less likely to ease up on interest rates in the near future.
The September jobs report measured a decline in the unemployment rate to 3.9% -- matching the 30-year low it hit in April -- from 4.1% in August. A low unemployment rate is a key indicator of a healthy economy, one that does not require assistance from the Fed in the form of easier monetary policy.
Also indicating that the economy is strong, the employment report counted 252,000 new nonfarm jobs in September. Netting out the loss of 27,000 temporary Census jobs and the return of 75,000 strikers, the underlying increase was 204,000, in line with the recent trend. A shift in monetary policy is unlikely to occur unless there is a pronounced slowdown in the pace of job-creation.
The benchmark 10-year
Treasury note lately was up 9/32 to 99 17/32, yielding 5.81%.
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