Today's Market: Stocks Open Mixed Following Warnings

<LI>Merrill Lynch drops Sun, Pivotal from techfolio.</LI><LI>AMD higher after warning, but semiconductors dip.</LI><LI>GE, Honeywell, JPM fall.</LI>

Author:: Kristen French
Publish date:: Dec 12, 2000 9:44 AM EST

A herd of earnings warnings stampeded the market last night and this morning. But with so many warnings already under its belt, and with chatter about the earnings slowdown already saturating the airwaves, the market's reaction has been relatively muted.

In early action, the

Dow Jones Industrial Average was up 3.4 to 10,730.7, the

Nasdaq was down 30.8 to 2984.3 and the

S&P 500 was down 3.5 to 1376.7.

Perhaps investors are hoping that the presidential election saga will come to an end today. Certainly the market will keep close vigil over the proceedings in the

U.S. Supreme Court

, which could rule today on hand recounts in Florida. Any resolution should spur a robust rally, while any sign that the battle will be thrown back to the

Florida Supreme Court

could put pressure on stocks.

Still, investors will probably remain cautious after yesterday's rally. The

Nasdaq managed to close 97.67 higher, and just yonder of 3000 -- a critical psychological level. Old industrials, meanwhile, slipped off their highs into the close yesterday. The

Dow ended up just 0.12% and the

S&P 500 closed up a meager 0.75%.

"It looks like we'll have a little bit of consolidation given the two-day rally we've had," said Todd Clark, head of listed trading at

W.R. Hambrecht

. "Futures closed defensively yesterday. We should settle in a bit. Investors are taking a bit off the table in what might be a surprise from the Supreme Court," he added.

Clark thinks the Nasdaq will trade sideways in the near term.

"If you take a look at the August peak and subsequent peaks, it's going to be tough to get back above downtrend line," he said.

Back on the earnings frontlines, while the semiconductor stocks seem finally to be immune to new warnings, other sectors and individual stocks are not.

The most recent round of warnings included two Dow components: photography giant

Eastman Kodak

(EK)

and diversified industrial

Honeywell

(HON) - Get Report

. Over in tech, online advertiser

Doubleclick

(DCLK)

and semiconductor stock

Advanced Micro Devices

(AMD) - Get Report

also warned.

While Kodak and Honeywell don't bode well for the Dow, they aren't too deadly, either. Kodak is a serial warner -- so no surprise there -- and Honeywell is being acquired by another Dow component,

General Electric

(GE) - Get Report

, which seems to be on track for next year's earnings.

"Honeywell is no big deal. Kodak warns every month. These are not huge problems," Clark said. "Particularly Honeywell, since GE is comfortable."

Still, GE this morning said that while it expects 2001 profits to meet estimates, those figures will exclude the impact of its Honeywell acquisition.

This morning, Kodak said it expects its fourth-quarter earnings to miss estimates due to reduced customer demand. The company now expects fourth-quarter earnings per share to fall in a range of 65 cents to 75 cents. Analysts polled by

First Call/Thompson Financial

were forecasting earnings per share for the quarter of $1.07.

Kodak also announced it plans to cut capital spending by $200 million, reduce inventories and impose spending controls. Kodak's stock was bamboozled in late September when it warned it would miss third-quarter estimates. The company then beat those lowered expectations by 3 cents with $1.40 a share.

Back in tech, hardware stocks may be struck by a

Merrill Lynch

downgrade on the sector this morning, while Internet stocks may take a hit from Doubleclick's warnings. But semiconductors should ignore AMD's warning.

Merrill Lynch is upgrading its sector weights on semi-cap equipment and wireless while downgrading computer hardware. It is also shuffling its "techfolio" this morning, dropping network computermaker

Sun Microsystems

(SUNW) - Get Report

and e-consulting company

Pivotal

(PVTL) - Get Report

and adding electronic-components distributor

Avnet

(AVT) - Get Report

and semiconductor maker

Texas Instruments

(TXN) - Get Report

Merrill's blow to Sun and downgrade on hardware-makers comes on the heels of some

selling in the stock yesterday on mediocre analyst comments on the stock and rumors about accounting irregularities and revenue recognition problems.

Banc of America Securities

analyst Kurtis King said he was reviewing his rating and price target on the stock.

Goldman Sachs

analyst Laura Conigliaro said she expected the company to meet, but not beat, earnings estimates and to remain under pressure. Sun rebounded in post-close trading last night after it denied the rumors.

Despite earnings warnings from almost every major company in the sector this quarter, it seems this sector still has a bit lower to go.

Doubleclick

lowered its earnings per share estimates for its fourth and first quarters last night, citing slowing advertising sales. Surprisingly enough, some analysts were relieved with the new numbers, but the picture still isn't

pretty. And

Yahoo!

(YHOO)

continues down, despite hitting a 52-week low yesterday -- partly on an analyst downgrade.

In the chip sector, it appears the bad news has been accounted for already. First, it was bellwether

Intel

(INTC) - Get Report

that said it would miss earnings Thursday night, but then rallied during Friday's trading session. Last night, it was Advanced Micro Devices that

warned. And, once again, investors weren't fazed. The stock was rising in off-hours trading.

But other high-flying tech sectors, such as fiber optics, which were slower to the tech stock guillotine, haven't been so lucky. Optics company

JNI

(JNIC)

was beaten yesterday after warning it would miss its fourth-quarter sales estimates by as much as 12%.

Bonds/Economy

Treasury prices were dropping again this morning after coming off of last week's rally yesterday. The benchmark 10-year

Treasury note was lately down 8/32 at 102 20/32, yielding 5.399%.

International

European markets had lifted off earlier lows this morning. The major indices were lately trading just below the flatline, though techs and telecom stocks remained weak.

London's

FTSE

was off 1.60 to 6368.70. Across the channel, Paris'

CAC-40

was falling 25.82 to 6052.06, while Germany's

Xetra Dax

was off 10.93 to 6771.59.

The euro was falling this morning again after coming off last week's 11-week high yesterday. It was lately trading down at $0.8779. It has been gaining in the past few weeks as the U.S. dollar weakens in the face of a slowing domestic economy.

Asian markets were mixed overnight. In Japan, the

Nikkei 225

rose on the Nasdaq's rally Monday, closing up 98.94 to 15114.64. Hong Kong's

Hang Seng

closed 78.94 lower to 15,329.6 on weakness in property shares.

The greenback was rebounding on the heels of yesterday's losses, lately higher against the yen to 111.635 yen.