(Updated from 9:39 a.m.)
The buffet of news served up on Wall Street this morning was none too savory, and stocks were losing steam as the morning progressed.
The market has been churning lower in the past few weeks without any catalysts to take stocks higher. And despite talk of a rate cut that could come as early as this week, stock prices were falling as the morning progressed. The
Dow Jones Industrial Average lately fell into negative territory, losing 5 to 10,437. The
Nasdaq Composite Index added 1 to 2264. And the
S&P 500 was up 1 to 1245.
slashed its first-quarter revenue estimates -- again;
downgraded several telecoms, including
; consumer-products giant
Procter & Gamble
cut its forecast for 2001 earnings; and German automaker
said it expected a
Dan Niles lowered his forecasts on chipmakers
, citing supply issues that would not likely bottom out until the third or fourth quarter. Micron was lately 3.9% lower, while Cypress was up 2.8%.
Fed might cut interest rates before its next official meeting on March 20 took hold in the last half-hour of Friday's trading session, helping to break a four-day losing streak on the tech-heavy Nasdaq. Still, the index remains near a two-year low. The blue-chip Dow also reversed gargantuan losses at the end of Friday's trading session, but it still closed lower on the day.
While some on Wall Street are still pretty doubtful the Fed will cut interest rates before its meeting, economists say the monetary policy body may be forced to act if the stock market continues to erode and if consumer confidence readings for February continue to tumble. The intermeeting cut theory began to gain credence on Wall Street after Wayne Angell, ex-Fed governor, said he thinks there is a 60% chance the Fed will cut interest rates by a half-percentage point this week.
Naysayers worry the threat of inflation could hold the Fed back. Some economic data released in the past two weeks showed much stronger gains in wholesale and retail prices during January than were expected, mostly due to high energy prices. Economists and the Fed are still more worried about depressed consumer sentiment levels and a potential recession than they are about inflation. But if higher energy prices are lasting and prices continue to soar, the double whammy could lead to stagflation and
cripple the Fed's interest-rate cutting plans even as the economic slowdown continues.
The Fed cut rates twice in January, inspiring a heady rally in stocks that month. But those gains and more have since been erased as the outlook for corporate earnings in coming quarters has begun to look more and more dire. Indeed, Texas Instruments is only the latest in a string of sector heavyweights that have warned this month. The company said this morning that revenue for the first quarter should decline about 20% compared to the fourth quarter, instead of the 10% it had forecast at the end of January. Texas Instruments blamed constrained demand. It was 0.7% lower.
The communications-equipment business has been especially hard-hit in recent weeks. Two major telecom-equipment makers,
have said in the past few weeks that things aren't looking good for business in coming quarters. And just last week,
issued a profit warning, while mobile-phone makers Nokia and Ericsson have seen their share prices plummet in the past week on
rumors they, too, would warn about upcoming earnings.
So now that the sector is all busted up, Merrill thought it might be a good time to recommend caution on the stocks. This morning, the brokerage downgraded Nokia and lowered its earnings per share estimates on Nokia and Ericsson, as well as telecoms
. After so much drubbing, Nokia was up 5.3%. Ericsson was gaining 2.3%. Alcatel and Marconi was also moving higher.
German automaker DaimlerChrysler also had some disappointing news for the market this morning. It was falling 3.3% after saying it expects a first-quarter loss because of the restructuring of its U.S. Chrysler division. The company had already announced it would slash Chrysler's workforce by 20%, or 26,000 jobs, and close six production plants.
And home-improvement retailer
this morning said it expected its first quarter
same-store sales coming in flat to negative. The company also reported fourth-quarter earnings that matched analyst estimates of 37 cents per share and raised its bottom-line projections for calendar 2001. It was gaining 4.4%.
Lowe's and its rival,
, have recently
lowered their forecasts. A good measure of their futures will be seen today when the latest figures on existing home sales are released. The data, which measures the selling rate of previously owned homes, is considered a good gauge of home-related spending, as well as overall consumer spending.
And there seems to be no end to legal troubles for software giant
, which for the second time this year is facing federal charges for false and misleading advertising. The case focuses on an ad campaign targeting handheld-computer maker
. Microsoft was recently up 1.7%.
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Treasury prices were slightly lower this morning after rallying boldly Friday on rumors of an imminent interest-rate cut. The benchmark 10-year
Treasury note was down 7/32 to 99 30/32, yielding 5.139%.
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European markets were mixed near midsession today. Telecom and tech stocks were rebounding from last week's losses, but financials were dragging on London's
. After hitting a 16-month low Friday, the FTSE was lately off 18.1 to 5925.6. Across the channel, markets were faring a little better, with Paris'
up 80.8 to 5403.6 and Frankfurt's
up 114.3 to 6189.7.
The euro was lately trading at $0.9096.
Asian markets fared less well overnight. Weakness in telecom heavyweight
weighed on Hong Kong's
index, which fell 50.33 points to 15,230. In Tokyo, weakness in tech stocks was partly countered by strength in bank shares, but the
finished lower, off 44.86 points to 13,201.14.
The dollar was trading at 116.53 yen.
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