Today's Market: H-P's Miss, Election Uncertainty Punish Stocks
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.
TheStreet Recommends
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 Dell Technologies Inc. Class C Report
scaled back its sales forecasts.
Before that,
Apple
(AAPL) - Get Apple Inc. 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 Dell Technologies Inc. Class C 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 Merck & Company Inc. Report
and
Johnson & Johnson
(JNJ) - Get Johnson & Johnson Report
were lower, as was tobacco titan
Philip Morris
(MO) - Get Altria Group Inc. 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.
Back to top
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
- Cisco (CSCO) - Get Cisco Systems Inc. Report: 43.5 million shares.
Intel (INTC) - Get Intel Corporation Report: 38.9 million shares.
Oracle (ORCL) - Get Oracle Corporation Report: 35.8 million shares.
Back to top
Sector Watch
FedEx's
(FDX) - Get FedEx Corporation 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 JP Morgan Chase & Co. Report
was lately off 2.6%.
Back to top
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%.
Back to top
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.
Back to top
