Profit Worries Force Shares Down for Third Straight Day

July 18, 2003
By BLOOMBERG NEWS

Stocks fell for a third day yesterday as I.B.M. said that companies were delaying software purchases and Nokia repeated a forecast for a slide in network equipment sales this year.

Stocks slumped even as companies in the Standard & Poor's 500-stock index have surpassed expectations in the second quarter. The index has gained 23 percent since its 2003 low on March 11, and many shares already reflect the more optimistic profit forecasts, some investors say.

"The market did a decent job of anticipating these earnings," said David Fowler, president of Lincoln Equity Management, which oversees $2 billion. "You've just had a market run-up very substantially. That's probably enough to cause the market to stall out."

The S.& P. 500 slipped 12.27 points, or 1.2 percent, to 981.73. Computer-related shares, including I.B.M. and Microsoft, accounted for almost half of the decline.

Qualcomm and other makers of mobile phone equipment retreated, contributing to the steepest decline of the Nasdaq composite index since May 19. Technology stocks make up 42 percent of the Nasdaq, which fell 49.95 points, or 2.9 percent, to 1,698.02. The index is up 27 percent this year.

United Technologies, Caterpillar and Coca-Cola gained, limiting the decline in the Dow Jones industrial average, after reporting results that beat estimates or raising profit forecasts. The Dow lost 43.77 points, or 0.5 percent, to 9,050.82.

Decliners outpaced advancers by the widest margin since March 24 as more than three stocks fell for every one that rose on the New York Stock Exchange. Some 1.7 billion shares changed hands on the Big Board, 12 percent more than the daily average over the last three months.

I.B.M. fell $3.41, to $83.33, and was the biggest drag on the Dow average. Second-quarter sales growth missed some investors' forecasts. Companies are delaying major software purchases, its chief financial officer, John Joyce, said. Sales rose 10 percent, to $21.6 billion, and would have increased 3 percent had the dollar been unchanged.

Other computer, software and semiconductor companies also fell. Microsoft, which reported earnings after the market closed, dropped 83 cents, to $26.69. Intel slid 38 cents, to $24.93. Microsoft reported net profit of $1.92 billion, or 18 cents a share, for the fiscal fourth quarter, compared with a profit of $1.53 billion, or 14 cents a share, a year earlier.

United States shares of Nokia, the world's top supplier of mobile phones, fell $3.57, to $14.38. The 20 percent drop was the biggest in three years. Nokia, of Finland, said third-quarter sales in the network business would drop as much as 20 percent.

Shares of Qualcomm, whose patents are used in more than 145 million mobile telephones, fell $1.63, to $35.69. Texas Instruments, the world's biggest supplier of semiconductors used to power mobile phones, lost 98 cents, to $18.25.

Treasury Prices FallBy Reuters

Treasury bond prices fell yesterday, recovering from earlier lows after battling surprisingly upbeat data on housing, jobs and regional manufacturing.

Benchmark 10-year yields nosed briefly back above the crucial 4 percent level to near four-month highs, after the Philadelphia Federal Reserve said manufacturing conditions staged a marked improvement in July.

The Philadelphia Fed business conditions index rose to 8.3 in July from 4.0 the month before, while the new orders index shot up to 10.4 from minus 0.5 the month before.

The improvement in conditions is hinting at more pain to come for bond holders as the flagging industrial sector appears to be recovering.

The benchmark 10-year note rose 132, to a price of 972132. Its yield was unchanged at 3.92 percent. And the 30-year bond gained 232, to 1071032. Its yield fell to 4.89 percent from 4.90 percent on Wednesday.

http://www.nytimes.com/2003/07/18/business/18STOX.html?ex=1059192000&en=8b3d4ddb3aba871c&ei=5062&partner=GOOGLE