U.S. stocks slide on economic worries
AAP News
7:42:020 29/04/2005
(Updates Microsoft price after the bell)
By Megan Davies
NEW YORK, April 28 (Reuters) - U.S. stocks slid on
Thursday, after a report showed the economy grew at its
slowest pace in two years during the first quarter, oil nudged
higher and earnings from companies, including Exxon Mobil
Corp., disappointed Wall Street.
The combination of negative news sent the Dow, S&P 500 and
Nasdaq down by more than 1 percent and pushed the Nasdaq to
its lowest close since October.
Exxon, the world's largest public oil company, fell 4
percent and weighed on the Dow after its profit missed
analysts' expectations as production declined. Other companies
that disappointed included Molson Coors Brewing Co., the
world's fifth-largest brewer, and JDS Uniphase Corp., a maker
of equipment to build fiber optic networks.
The Dow Jones industrial average was down 128.43 points,
or 1.26 percent, to end at 10,070.37. The Standard & Poor's
500 Index was down 13.16 points, or 1.14 percent, to close at
1,143.22. The Nasdaq Composite Index was down 26.25 points, or
1.36 percent, at 1,904.18.
"The market digested the economic data and wasn't at all
pleased that the GDP numbers came in at a lower-than-expected
rate," said Gordon Fowler, Jr., chief investment officer at
The Glenmede Trust Co. "There's growing concern that this slow
patch is going to be longer and deeper than people originally
thought."
In economic news, a government report showed that gross
domestic product, which measures total output of goods and
services within U.S. borders, grew in the first quarter at an
annual rate of 3.1 percent -- lower than expected -- as
consumers and businesses were pinched by rising energy prices.
The forecast called for growth of 3.6 percent, according to
economists polled by Reuters..
The GDP report also showed a pickup in prices, which
analysts predict means another quarter-percentage-point hike
in interest rates when Federal Reserve policy-makers meet on
Tuesday.
Cyclical stocks such as manufacturers, which are
particularly sensitive to swings in the economy, fell.
Caterpillar Inc. slid $1.35 to $86.70, while United
Technologies Corp. fell $1.74 to $99.84.
OIL PRICES RISE AND BONDS RALLY
A late rebound in oil prices contributed to the market
extending its losses at the end of the session.
"In many ways, the oil markets have taken on as much of a
role in determining where economic growth is going to be as
much as the Fed does," Fowler said. "For the interim, there's
going to be a very strong relationship between the oil price
and where the markets go."
NYMEX June crude futures rose 16 cents to settle at $51.77
a barrel -- retracing from an earlier slide below $50. High
oil prices worry Wall Street because they can hurt consumer
spending and corporate profits.
Some traders pointed to a flight away from equities and
into bonds -- seen as a safe haven during troubled times in
the economy.
U.S. bonds extended their earlier gains as the stock
market slid. The 10-year note yield, which moves inversely to
its price, fell to a nine-week low of 4.15 percent.
"We've been seeing this for three weeks now," said Peter
Boockvar, equity strategist at Miller Tabak & Co. "The bond
market is rallying over concerns about the economy, and that's
why stocks have sold off. It's the theme of slowing economy,
slowing earnings, that's why people are buying bonds."
MICROSOFT INCHES UP AFTER HOURS
After the closing bell, Microsoft Corp. nudged higher as
the software maker reported higher quarterly earnings and
forecast revenue for the current quarter that is higher than
the average Wall Street estimate. In after-hours trading,
Microsoft's shares were up 18 cents at $24.63 after closing
the regular Nasdaq session at $24.45.
"On an apples-to-apples basis, the earnings number for
this quarter looks to be in line and it looks like the revenue
was a little light," said Jordan Posner, senior portfolio
manager at Matrix Asset Advisors. "The guidance that they put
out for next quarter and for fiscal 2006 look to be in line or
somewhat better than where estimates have been. It looks to be
a good quarter and constructive on the outlook."
Among companies falling during regular trading, Molson
Coors sank 18.5 percent, or $14.30 to $63 on the New York
Stock Exchange, after it reported a first-quarter loss, citing
lower sales in key markets and merger-related charges.
Exxon Mobil fell $2.38 to $56.
Among stocks moving, JDS Uniphase, a maker of equipment to
build fiber optic networks, fell 9.7 percent, or 16 cents to
$1.49 after its quarterly loss widened as the company
consolidates manufacturing and trims jobs.
Nextel Communications Inc., the fifth-biggest U.S. mobile
phone provider, fell 1.6 percent, or 46 cents to $28.53,
weighing on the Nasdaq, after it said first-quarter profit was
nearly flat.
Contract electronics manufacturer Sanmina-SCI Corp.
tumbled 16 percent, or 71 cents to $3.79 on Nasdaq a day after
it posted a large quarterly loss as it wrote off goodwill.
Among gainers, Starbucks Corp. rose 4.6 percent, or $2.15
to $48.56 a day after it reported a 27 percent increase in
quarterly earnings and raised its profit forecast.
Goldman Sachs on Thursday raised its investment rating on
Starbucks to "outperform" from "in-line."
Procter & Gamble Co. nudged up 46 cents to $53.99 and was
the Dow's second-biggest percentage gainer. P&G, the maker of
Crest toothpaste and Pampers diapers, said earlier in the day
that quarterly profit jumped 13 percent, beating estimates,
and raised its fiscal year forecast.
Trading was active, with 1.75 billion shares changing
hands on the New York Stock Exchange, above the 1.46 billion
daily average for last year. About 1.93 billion shares were
traded on Nasdaq, above the 1.81 billion daily average last
year.
Decliners outnumbered advancers on the New York Stock
Exchange by about 11 to 5 and by about 11 to 4 on Nasdaq.
(Additional reporting by Anna Driver)
REUTERS
Reut 21:41 04-28-05
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