Stocks tumble on earnings warnings, Microsoft news

By LISA SINGHANIA

Associated Press

NEW YORK — Weary investors sold off stocks today on earnings warnings from two major banking companies, sending blue chip and technology stocks down sharply.

A gloomy forecast from Microsoft after the market closed increased Wall Street’s anxiety and pulled other tech issues lower in extended-hours trading. The software maker was off 6 percent at one point.

"Microsoft is such a big company that I think this will affect the market Friday. How much, I don’t know," said Barry Berman, head trader for Robert W. Baird &amp Co "We’ll have to wait and see, but the mood of the market is pretty dismal right now."

The Dow Jones industrial average closed down 119.45 at 10,674.99, after falling as much as 178 points earlier in the session.

The Nasdaq composite index slid 94.26 to 2,728.51, and the Standard &amp Poor’s 500 index ended the session down 19.06 at 1,340.93.

Wall Street spent the day focused on fears that the economy is slowing faster than it would like and that more companies will issue disappointing outlooks. There was no typical post-election rally because the market had already factored in a win by Texas Gov. George W. Bush.

"I guess we have to move on with the business of the economy and it continues to be disappointing," said Arthur Hogan, chief market analyst for Jefferies &amp Co. "It’s a different sector every day."

The high-tech sector was likely to drop at least in the early going Friday after the latest earnings warning, this one from Microsoft. The software maker fell $3.50 to $52 in after-hours trading on its announcement, extending a $1.75 drop in the regular session.

Microsoft blamed weak computer demand for the decline, and the selloff quickly spread to other tech stocks affected by PC sales. Dell was down $1.06 at $18.88, compounding a 50-cent loss in the regular session. Chip maker Intel fell 94 cents to $34.19, adding to a 38-cent drop during the day.

Tech issues have suffered investors’ ire the most in a series of selloffs that began around Labor Day, but Wall Street on Thursday punished blue chips based on the poor earnings outlooks from the two banks.

Chase and J.P. Morgan, which are merging to form one of the nation’s largest banking companies, issued a joint fourth-quarter earnings warning Thursday, citing higher expenses and a difficult capital markets. The companies added that they will cut up to 5,000 jobs.

Chase fell $1.63 to $42.88, while J.P. Morgan tumbled $6.31 to $157.94.

Other financial issues suffered, as well. Citigroup was down $2.25 at $50.75, and American Express slipped $1.06 to $55.44.

Earnings woes also plagued other companies. Predictions of disappointing quarterly outlooks sent United Parcel Service down $3.94 to $58.69 and Maytag, the nation’s No. 3 appliance maker, slipped $2.50 to $27.19.

Still, some companies were rewarded for a good performance. Software maker Oracle rose $1.23 to $28.73 in after-hours trading, canceling out an 88-cent loss in regular trading, on a better-than-expected earnings report.

And America Online and Time Warner moved higher after the Federal Trade Commission approved their $111 billion merger, although the deal still must be approved by the Federal Communications Commission.

AOL shares were up $1.55 at $50, while Time Warner’s shares rose $1.90 to $74.50.

Before the market opened, the government reported wholesale inflation rose a tiny 0.1 percent in November. The news is the latest sign that the economy is slowing and could put added pressure on the Federal Reserve to eventually cut interest rates.

Declining issues led advancers 5 to 3 on the New York Stock Exchange. Consolidated volume was 1.27 billion shares, down from 1.42 billion shares at the same point Wednesday.

The Russell 2000 index was down 8.09 at 461.82.

Overseas, Japan’s Nikkei stock average fell 1.6 percent. Germany’s DAX index was off 2.3 percent, Britain’s FT-SE 100 slipped 2.2 percent, and France’s CAC-40 closed down nearly 1.0 percent.

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