Today's Market: H-P's Miss, Election Uncertainty Punish Stocks

One thing is for sure, the market hates indecision.
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Buyers have two good reasons to be wary this afternoon.

No. 1: The outcome of last Tuesday's presidential election is still unknown. To investors, that uncertainty is enough of an incentive to stay out of the game. "We're looking for any news so that we can make more certain bets on the marketplace," said Bob Basel, director of listed trading at

Salomon Smith Barney

. So far, there is none.

No. 2: An earnings slip-up by

Hewlett-Packard

(HWP)

set up the market for today's fall. "H-P's 14.8% fall has hit the

Nasdaq and the New Economy hard," noted Basel.

Indeed, at last look, both the

Dow Jones Industrial Average and the Nasdaq had triple-digit losses. The technology-laden Nasdaq had fallen 133 to 2894, its lowest level in more than a year. The Comp hasn't traded below 3000 since October of last year, when it began its heady ascent towards 5000.

This morning, Hewlett-Packard posted fourth-quarter earnings of 41 cents a share, missing the 15-analyst estimate by 10 cents, but up from the year-ago 36-cent profit. The result came as a surprise to investors, who had expected H-P to meet its forecasts. On Sept. 22, the company said that it would meet fourth-quarter earnings and revenue targets.

The

Dow Jones Industrial Average component had lately knocked 33 points off the blue-chip index.

In a press release, the company said: "We are pleased that revenue growth is accelerating, but very disappointed that we missed our earnings per share growth target this quarter due to the confluence of a number of issues that we now understand and are urgently addressing."

Hewlett-Packard attributed its reduced profitability to margin pressures, adverse currency effects, higher-than-expected expenses and its business mix. The company did say that its business is "healthy," demand is strong and that it is not backing away from growth targets. H-P said it had strong revenue growth in computing systems, but there was an order backlog in software.

H-P's earnings shortfall adds to a number of disappointments from the PC sector. In the last month, several industry leaders have slashed their earnings outlooks for upcoming quarters. Just last Friday,

Dell

(DELL) - Get Report

scaled back its sales forecasts.

Before that,

Apple

(AAPL) - Get Report

and

Compaq

(CPQ)

issued warnings of their own. Of the top-tier PC-makers, only

Gateway

(GTW)

has said this quarter that it is comfortable with earnings estimates for next year.

In recent action, shares of Compaq had fallen 4.3% and Gateway had decreased 3.8%. The

Philadelphia Stock Exchange Computer Box Maker Index

had dropped 2.8%.

No doubt, It's a bad time for PC-makers. In the last month, several computer leaders have cut their earnings outlook for upcoming quarters, and the whole sector has been punished for it. The latest of the bunch was

Dell

(DELL) - Get Report

, which Friday helped to knock the

Nasdaq Composite Index down 171.4, or 5.3% to 3028.9, the index's low for the year. The

Dow also fell on its face, losing 231.3, or 2.13%, to 10,602.95.

OK, Who Won This Thing?

The market, which had appeared to have placed a high probability on a Bush win, appears to have reconsidered its odds in recent trading. Stocks that bounced last week in anticipation of a Republican victory had lately fallen. Lately, pharmaceutical companies

Merck

(MRK) - Get Report

and

Johnson & Johnson

(JNJ) - Get Report

were lower, as was tobacco titan

Philip Morris

(MO) - Get Report

.

Why the downward turn? "It's tough to make sector bets when we don't know the regulatory backdrop we'll face," said Todd Clark, head of listed trading at

W.R. Hambrecht

. With volume low on both major indices, many investors have clearly decided to keep their money on the sidelines.

Market Internals

Breadth was negative on light volume.

New York Stock Exchange: 807 advancers, 1,940 decliners, 616 million shares. 29 new 52-week highs, 77 new lows.

Nasdaq Stock Market: 696 advancers, 3,108 decliners, 1 billion shares. 16 new highs, 313 new lows.

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Most Active Stocks

NYSE Most Actives

  • Hewlett-Packard: 26.7 million shares.
  • Nortel Networks (NT) : 13.5 million shares.
  • EMC (EMC) : 13.3 million shares.

Nasdaq Most Actives

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Sector Watch

FedEx's

(FDX) - Get Report

announcement that it would acquire regional freight carrier

American Freightways

(AFWY)

in a stock and cash deal valued at $1.2 billion, helped boost the transport sector. In recent action, shares of American Freightways had bounced 58% higher. The

Dow Jones Transportation Average

was up 0.9%.

With most other sectors of the market in the red, financials were in a particularly bad way. The

American Stock Exchange Broker/Dealer Index

was down 4.4%, while the

Philadelphia Stock Exchange/KBW Bank Index

fell 2.9% lower. The

S&P Insurance Index

lately lost 2%.

J.P. Morgan

(JPM) - Get Report

was lately off 2.6%.

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Bonds/Economy

Bond prices were soaring this morning as investors scrambled out of stocks in search of a safe haven. The benchmark 10-year

Treasury note was up 8/32 to 99 29/32, yielding 5.761%.

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International

Telecom, media and tech stocks, as well as banks, were weighing on

European markets around midsession, and the major indices were steeped in negative territory.

The

FTSE 100

stood down 125.40 points at 6274.80.

Over on the continent, the

CAC-40

in Paris lowered 109.76 lower to 6037.73 and the

Xetra Dax

in Frankfurt was off 111.83 to 6739.86.

The beleaguered euro was lately trading at $0.8621. Recent efforts by the

European Central Bank

to prop up the currency have done little to really give the single currency a jump start.

Asian

equity markets skidded lower Monday, following Friday's ugly performance on Wall Street, as investors remained concerned about the uncertainty surrounding the U.S. presidential election.

In Tokyo, the

Nikkei 225

closed down 323.9 points, or 2.2%, at 14,664.6

In Tokyo currency trading, the dollar traded up to 108.01 yen Friday. It was lately trading at 107.71 yen.

Hong Kong's

Hang Seng

index also ended in the red, falling 573.7, or 3.7%, to 14,815.

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