Stocks fall sharply on glut of bad news


Wall Street plunged back into pessimism Friday, sending stocks sharply lower after Nortel Networks, Dell Computer and Hewlett-Packard warned that business will slow further this year. A spike in inflation and military action in the Middle East increased the market’s woes.

“The market just doesn’t like today at all,” said Dan Ascani, president and research director at Global Market Strategists in Gainesville, Georgia.

After a session of heavy trading and plenty of reasons for selling, the Dow Jones industrial average lost 91.20 to close at 10,799.82. The Dow was up 0.2 percent for the week.

The tech-focused Nasdaq composite index tumbled 127.53 to 2,425.38, a 5 percent drop for the day and a 1.8 percent decline for the week. The broader Standard & Poor’s 500 index declined 25.08 to 1,301.53, ending the week off 1 percent.

The market’s losses came largely from the technology sector after several big companies issued disappointing outlooks for the year.

Nortel plunged US$9.75, or nearly 33 percent, to finish at US$20. After the market closed Thursday, the fiber optics maker cut its profit outlook and raised the number of its planned job cuts to 10,000. Nortel’s news brought down its key supplier, Corning, which plunged US$9.01, a 21 percent drop, to US$33.

A bleak outlook also hurt Dell, which fell US$1.50 to US$23.50. Dell announced late Thursday it missed earnings expectations by 1 cent and that it will cut 1,700 jobs.

Although layoffs reduce costs, typically causing a stock price to pick back up, analysts said this round of job cuts made investors fearful about how much the economy is hurting.

“When you have companies like Dell laying people off for the first time in 16 years, that marks a change in the trend of the economy,” Global Market’s Ascani said.

The Dow’s tech losses were led by Hewlett-Packard, down US$3.22 at US$33.13. H-P also warned of challenging business conditions late Thursday. The computer maker’s losses spread to other Dow tech stocks, including Microsoft, down US$1.63 at US$57.19.

“There’s a combustible combination of bad news out there,” said Alan Ackerman, executive vice president at Fahnestock & Co.

The bad news brought back “a lot of caution and exhaustion for traders who are trying to figure out where to go in the market, especially before a long, holiday weekend,” Ackerman said. The market is closed Monday in observance of Washington’s Birthday.

Friday’s losses were a dramatic retreat from the more optimistic approach investors had taken toward high-tech stocks in recent weeks. While Wall Street had tolerated individual companies’ reduced business forecasts, the news of three dismal outlooks at once rattled the market.

But investors’ skittishness extended beyond tech as they also bid down some stocks in less risky, so-called defensive sectors like pharmaceutical and consumer product issues.

Merck fell 81 cents to US$77.29, but Procter & Gamble rose 98 cents to US$74.84.

Investors also bid stocks lower on a Labor Department report that wholesale inflation rose 1.1 percent in January, the biggest jump in a decade. The spike could diminish the chances that the Federal Reserve Board will lower interest rates at its meeting next month.

The two cuts the Fed made in January are expected to help improve the sluggish economy and anemic corporate earnings in the second half of the year. But investors have been hoping for more reductions, although they were disappointed earlier this week when Fed Chairman Alan Greenspan indicated that future cuts will be less aggressive than the market had wanted.

Word in the afternoon of a U.S. and British air attack over Iraq added to the selloff. The government said American and British planes struck Iraqi air defense sites in a mission to destroy threatening radar systems.

Declining issues outnumbered advancers nearly 2 to 1 on the New York Stock Exchange. Volume was 1.24 billion shares, ahead of 1.12 billion Thursday.

The Russell 2000 index, which tracks the performance of smaller company stocks, fell 9.57 to 499.28. It ended the week up 0.4 percent.