Stocks Fall, Hit by More Profit-Warnings

Original Source Thursday July 5 10:33 AM ET Stocks Fall, Hit by More Profit-Warnings

Stocks Fall, Hit by More Profit-Warnings

By Elizabeth Lazarowitz

NEW YORK (Reuters) - Stocks sagged in early morning trading on Thursday, as investors returned from the U.S. Independence Day holiday to find the persistent rain of corporate earnings warnings had not abated.

A downbeat outlook from Britain's Marconi (MONI.L) that whacked high-technology shares across Europe also cast its shadow across Wall Street. The bellwether telecommunications equipment company said lower customer orders would cut its operating profits in half this year.

The news from Corporate America was not much better. Gloomy corporate profit forecasts trickled in from Knight Trading Group Inc. (NasdaqNM:NITE - news), the largest Nasdaq dealer, and Federated Department Stores Inc. (NYSE:FD - news).

``It's a continuation of earnings warnings and fears of a global recession,'' said Barry Berman, managing director of equity trading at Robert W. Baird & Co. "Whatever news there is, is negative, and it's just kind of weighing on the market."

Financial markets were closed Wednesday for the Fourth of July holiday and as Wall Street kicked off Thursday's trading it was clear that, at least for now, the fireworks were over.

The technology-laced Nasdaq Composite Index (^IXIC - news) was down 11.67 points, or 0.55 percent, at 2,129.13.

The Dow Jones industrial average (^DJI - news) fell 12.96 points, or 0.12 percent, to 10,558.15. The broader Standard & Poor's 500 Index (^SPX - news) was down 1.77 points, or 0.14 percent, at 1,232.68.

The corporate confession season -- when companies admit to profit shortfalls -- was in full swing.

Marconi's U.S.-traded stock fell $3.66 to $3.37. Other telecoms-related stocks were dented, as well, sending the American Stock Exchange's N.A. Telecom Index down 1.1 percent.

Knight Trading cut its earnings outlook in half because of a sluggish market environment and lower trading volume. Its stock ticked down 2 cents to $10.19.

Federated Department Stores cut its second-quarter earnings and full-year profit outlook, citing weak sales at its department stores. Its shares lost $3.43 at $36.95.

Semiconductor equipment maker ASML Holding NV's (NasdaqNM:ASML - news) U.S.-traded stock slid after the Dutch firm said it could lose as much as $88 million in the first-half and withdrew optimistic expectations of a recovery later in the year. It fell $2.16 to $20.06.

The Philadelphia Stock Exchange's semiconductor index (^SOXX - (^SOXX - news) fell 2.35 percent.

``There certainly will be (more warnings), and I'm su that's in folk's minds,'' said Tom Sparico, managing director of equities at Bengal Partners in Stamford, Conn. "The general feeling that we're starting to improve a little bit is going to dissipate to, 'Let's see it in reality.'"

Voice and data services company WorldCom Inc. (NasdaqNM:WCOM - news) reduced its cash earnings outlook for 2001 due to its investment in Brazil's Embratel (EBTP4.SA) (NYSE:EMT - news) and recent purchase of Intermedia Communications Inc.

WorldCom rose 4 cents to $14.51.

In economic news, the National Association of Purchasing Management reported its June index of non-manufacturing activity rose to 52.1 from 46.6 in May.

The government reported U.S. weekly jobless claims rose to 399,000 for the week ended June 30, in line with economists' estimates, from a revised 392,000 in the prior week.

The main economic event this week comes Friday when the government reports on U.S. payrolls.

Honeywell International Inc. (NYSE:HON - news) late Tuesday said it brought back former Chairman Lawrence Bossidy to replace Michael Bonsignore as chairman and chief executive just hours after European regulators killed its $42 billion merger with General Electric Co. (NYSE:GE - news). Honeywell was up $1.31 at $36.22.

Overseas, the European Central Bank kept its interest rates unchanged on Thursday as expected, leaving its key minimum bid rate at 4.50 percent. ECB President Wim Duisenberg made it clear earlier this week that the ECB believed rates were at appropriate levels.