(Updated from 4:24 p.m.)
For the second day in a row, concerns about earnings and the economy weighed on Wall Street. Thrown into the news mix: the increased possibility that
proposed acquisition of
might fall apart.
"More earnings warnings and signs of a slowdown in the economy have caused a buyer's strike today," said Todd Clark, head of listed trading at
. "There are a lot of reasons for people to keep money in the bank."
Clark added that investors were hesitant ahead of Friday's
triple-witching, the quarterly expiration of index futures, index future options and certain stock options. "People didn't feel like they had an edge, because there is so much strategy in unwinding positions, which exacerbates price movements around expirations."
Dow Jones Industrial Average, which counts GE and Honeywell among its 30 components, fell 207 points, or 1.9%, to 10,665. The
Nasdaq Composite Index dropped 77.5 points, or 3.6%, to 2045. And the
S&P 500 was off 22.5 points, or 1.8%, to 1219.
GE and Honeywell, which proposed a merger last October, submitted their final plan for approval from the
this morning. But they acknowledged the offer was
far short of what regulators wanted. The companies offered to divest $2.2 billion in revenues in Honeywell's aerospace business, but the overseas regulators wanted more. Honeywell, which saw its biggest volume day ever, slipped 12.4% to $37, while GE rose 2.4% to $49.
It's Raining Warnings
Just after the closing bell,
cut its sales estimate for the fourth quarter, citing a slowdown in telecommunications spending. The manufacturer of communications equipment said it anticipates fourth quarter sales of $600 million, compared to earlier guidance of $700 million. Ahead of the announcement, JDSU closed down 2.6% to $13.81.
The gush of earnings news that has rained down on Wall Street over the past two weeks has been mostly negative.
Thomson Financial/First Call
, a market research firm, has collected 743 preannouncements this season. Of the total, 483 of them, or 65%, have been negative. 34.3% of the warnings have come from the technology sector, with most of the bad news coming from the semiconductor sector.
"There is a growing perception that the earnings turnaround might not happen as soon as people want," said Jim Volk, co-head of institutional trading at
In the financial arena,
warned that second-quarter earnings estimates could fall short of analysts' expectations due to a slowdown in trading activity. The discount broker reported daily average trades for May 2001 that were down 7% from month-ago levels, and down 11% from year-ago levels. Schwab ended the day behind 7.6% to $16.03.
Additional corporate headlines did little to reassure investors about the overall picture today. Telecommunications company
was hit by a downgrade to neutral from accumulate at
. In a note entitled Nuclear Winter, the firm wrote that its "recent field checks" have led it to believe that the next few quarters' results for Corning's high-margin fiber business will be below even the brokerages' "worst case scenario. Corning fell 7.7% to $16.02.
And there was more trouble for telecommunications-equipment maker
. The company's bid to sell two plants to
fell through, hindering its efforts to raise cash,
The Wall Street Journal
reported today. Lucent is trying to raise $2 billion by Sept. 30 in order to meet the terms of a $4 billion revolving credit line with its banks. If it can't, it won't be able to complete the spinoff of
microelectronics unit. Lucent took the business public in March, but still holds a 58% stake. It slipped down 7.5% to $6.70. Agere lost 3.9% to $6.15.
Producer Prices Rose Less Than Expected
In economic news, the May
Producer Price Index, released this morning, came in better than expected -- and seemingly confirmed Fed governors' recent statements that
inflation is being contained. The PPI, which measures the change in wholesale prices, rose 0.1%. It was expected to climb 0.3%.
While the data raise hopes the
Federal Reserve will cut interest rates when it meets on June 26 and 27, in response to weakness in the economy, it gave investors little incentive today. So far this year, the central bank has cut rates five times, lowering short-term rates by 2.5% to their lowest level since May 1994. Currently, the
fed fund futures -- a good proxy for the bond market's expectations of monetary policy -- are pricing in a 100% chance the Fed will cut rates another 25 basis points and pricing in 25% odds for a 50 basis-point cut.
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The major European indices all finished lower. London's
fell 67.7 points to 5752.5. Across the channel, the Paris
decreased 56.6 points to 5297.1, and Frankfurt's
shed 84.1 to 6027.9.
rejiggered its European portfolio overnight, raising the weighting of some technology hardware stocks, including
, and reducing its weightings in some food, retail and media stocks. Nokia, however, was continuing to slide after warning earlier this week of financial problems. It lost 6.3% to $22.10 on the NYSE.
The euro was lately trading lower at $0.8504. The greenback was slipping to 122.69 yen.
Asian markets were mixed overnight. Japan's
rose 0.18%, while Hong Kong's
index fell 2.03%.
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