Techs weigh on US markets
Nervous US investors overlooked strong earnings from Citigroup and a possible merger of two department store giants, pushing stocks substantially lower today after disappointing earnings from the technology sector.
Investors were worried after market favourite eBay missed its earnings target for the fourth quarter and said its outlook for the current quarter was lower than expected, leading three brokerage firms to lower their ratings on the online auctioneer.
Cell phone maker Qualcomm Inc likewise issued a disappointing profit forecast.
The pressure from tech shares took momentum from Citigroup’s strong earnings, and investors also shrugged off reports of merger talks between Federated Department Stores and May Department Stores.
In the face of other uncertainties – the forthcoming Iraqi elections, Opec’s meeting on January 30 and ongoing concern about inflation – the market will probably continue to give ground should earnings disappoint, analysts said.
The Dow Jones industrial average fell 68.50, or 0.65%, to 10,471.47.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index was down 9.22, or 0.78%, at 1,175.41, and the Nasdaq composite index dropped 27.71, or 1.34%, to 2,045.88.
In economic news, the Conference Board’s Index of Leading Economic Indicators rose 0.2% in December, with November’s rise revised to 0.3%. The index is designed to measure future economic activity.
The talks between Federated and May, reported today by The Wall Street Journal, signals another major consolidation in the retail sector, which is struggling to overcome the dominance of Wal-Mart.
The proposed merger would combine Federated’s Macy’s and Bloomingdale’s stores with May’s Lord & Taylor, Filene’s and Marshall Field’s.
Federated slid 1.77 to 55.31 on the news, while May, which recently jettisoned Chief Executive 0fficer Gene Kahn, gained 2.88, or 9.18 %, to 34.25.
Ebay tumbled 19.72, or 19.14%, to 83.33 after missing Wall Street profit forecasts by a penny per share. The company drew immediate criticism from analysts after posting a 2005 outlook that, while still very solid, was less than expected.
Qualcomm posted a 46 % rise in first quarter earnings, thanks to upgraded wireless networks, and surpassed Wall Street profit forecasts by a penny per share. But investors were disappointed with a conservative 2005 outlook. Qualcomm skidded 3.29, or 8.01%, to 37.78.
Citigroup dropped 27 cents to 47.77 after reporting record quarterly earnings that were in line with Wall Street expectations. The financial giant and Dow component also announced a 10% increase in its quarterly dividend.
Ford swung to a profit in the latest quarter, compared to heavy losses a year ago stemming from a major restructuring effort. The car manufacturer beat analysts’ expectations by a penny per share. Ford nonetheless lost 47 cents to 13.46.
AT&T fell 44 cents to 18.07 after seeing its fourth quarter profit surge nearly 84 % thanks to a one-time tax benefit. The telecommunications giant beat Wall Street profit forecasts by 20 cents per share, even though it posted a loss for the full year. The company’s 2005 outlook was muted, however.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume was heavy.
The Russell 2000 index of smaller companies was down 5.57, or 0.9%, at 612.34.
