Associated Press
NEW YORK — Stocks fell sharply Tuesday as investors girded themselves for third-quarter earnings reports amid renewed concerns that the moderating economy and higher oil prices will hurt corporate profits.
The downgrades of two chip makers early in the day sent technology issues tumbling, as investors sold off shares of stocks they feared especially vulnerable.
It wasn’t clear if better-than-expected results from Yahoo would be enough to head off a further decline today. Adding to the pressure was Lucent Technologies, which warned of disappointing fourth-quarter results.
"The investor or trader needs to be very cognizant that we are in a very unsteady, very fragile market and I don’t think we’re going to turn around for any sustainable rally until we get out of this earnings season," said Ricky Harrington, a technical analyst at Wachovia Securities in Charlotte, N.C.
Stock indicators have been heading lower since the beginning of September on worries that the moderating economy would affect third-quarter results. A string of warnings from industry leaders such as Dell, Intel and Apple Computer have only strengthened those concerns.
Technology issues led the market lower and brokerage stocks also fell on persistent speculation that some of the firms have too many high-risk investments. Morgan Stanley Dean Witter was especially hard hit, dropping $8.75 to $74.50. Discount brokers fared better, lifted by the news that Deutsche Bank wanted to buy out the portion of National Discount Brokers it doesn’t already own.
But the focus of the day again was on earnings. Investors continued to punish the stocks of companies with disappointing results, while rewarding those with healthy profits.
Yahoo reported earnings slightly above Wall Street estimates after the market closed. Motorola’s earnings per share were in line with Wall Street estimates, but sales were somewhat weaker. Lucent, which warned after the market closed, fell $7.06, nearly 23 percent, to $24.25 in after-hours trading, extending the $1 drop in regular trading. The market sent shares of PacifiCare Health Systems down 35 percent to $21.02 in after-hours trading after it issued a similar warning.
The repeated sell-offs in the market since September reflect investors’ growing concerns about the health of the overall market, said Hugh Johnson, chief investment officer at First Albany Corp.
"When you’re worried that the economy and earnings are slowing, you buy drugs and utilities," Johnson said. "Drugs were the top-performing group in the market today and electric utilities were number five."
Rising oil prices, up to $33.18 per barrel of sweet crude Tuesday on the New York Mercantile Exchange, haven’t helped ease those worries.
Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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