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Profit warnings hit war enthusiasm Original Source Link: (May no longer be active)
http://biz.yahoo.com/cbsm-top/030408/481933e9e3005c0af16b526ce08412ac_1.htmlhttp://biz.yahoo.com/cbsm-top/030408/481933e9e3005c0af16b526ce08412ac_1.html
CBS MarketWatch
Stocks feel heat as warnings pile up
Tuesday April 8, 12:42 pm ET
By Susan Lerner
NEW YORK (CBS.MW) -- U.S. stocks were under pressure Tuesday as a deluge of profit warnings countered enthusiasm that the war could be coming to a speedy close.
Cautious outlooks dominated the news as companies across a broad range of sectors warned that results would come in below expectations. RF Micro Devices, Mead Westvaco, MotherWorks, See Beyond and Nautilus were among those issuing negative pre-announcements.
The Dow Jones Industrials (CBOT:^DJI - News) were off 3 points to 8297 while the Nasdaq Composite Index (NasdaqSC:^IXIC - News) dropped 5 points, or 0.3 percent, to 1,385 and the S&P 500 (CBOE:^SPX - News) dipped 1 point, or 0.1 percent, to 878.
Though hopes were that reports that U.S. bombs might have taken out key Iraqi leadership including Saddam Hussein and his sons would spark stocks, investors also had to contend with what looked to be a disappointing earnings season.
Especially with low volumes prevailing, Steve Kolano, an equity trader at The Boston Company Asset Management, said war headlines will continue to move stocks but the Street is also realizing it doesn't really know what's going to happen with the economy once the war is over.
"With uncertainty comes selling," Kolano told." Before we were using war as an excuse but now with the end definitely in sight we're starting to wonder what will happen with business spending and the economy, especially given the negative pre-announcement we're seeing."
Following up on a tip that Saddam and his sons might be holding a meeting at a residential building, the U.S. launched an attack Monday night, dropping four 2,000 'bunker-busting' bombs on the building. See full report on the war. President Bush said Tuesday that it was not known whether Saddam survived the attack.
Mirroring recent trends, Kolano said futures moved higher on the news this morning but there was no follow through as investors continue to take profits while waiting to see what happens with the economy.
Hewlett-Packard (NYSE:HPQ - News) , Disney (NYSE:DIS - News) , General Motors (NYSE:GM - News) , DuPont (NYSE:DD - News) , and Intel (NasdaqNM:INTC - News) were the worst performing blue chips.
Altria (NYSE:MO - News) was the best performer on the Dow, notching a 5.6 percent gain after receiving a stay of a damage award. Other Dow advancers included Microsoft (NasdaqNM:MSFT - News) , Citigroup (NYSE:C - News) , General Electric (NYSE:GE - News) , and AT&T (NYSE:T - News) .
Chip stocks were among the worst performers following disappointing outlooks from RF Micro Devices and Microchip. The PHLX Semiconductor Index (Philadelphia:^SOXX - News) slumped 3.2 percent.
Airline issues also slid after Citigroup Smith Barney slashed its rating on the sector to "marketweight" from "overweight" following recent gains in the group's stocks. AMR Corp. (NYSE:AMR - News) gave up 13 percent, Continental Airlines (NYSE:CAL - News) lost 3.1 percent and Delta Air Lines (NYSE:DAL - News) fell 5 percent. The Amex Airline Index (AMEX:^XAL - News) descended 2.5 percent.
Dow news
Altria rose after an Illinois judge temporarily blocked a $3 billion punitive-damages award that another judge had ordered the company's tobacco unit to pay the state. The $3 billion was awarded as part of a $12 billion verdict against Philip Morris USA in a class-action suit charging the unit with making deceptive claims about "light" cigarettes.
Walt Disney skidded 2.5 percent after the Dow component said it plans to sell about $1 billion worth of senior convertible notes due 2023 under a shelf registration statement filed with the SEC.
Earlier, Morgan Stanley cut its 2003 earnings estimates for the media and entertainment giant (NYSE:DIS - News) to reflect the estimated near-term impact of the war with Iraq and heightened risk of terrorism.
On the heels of Monday's announcement by McDonald's (NYSE:MCD - News) that it will take out $700 million in capital spending this year to free up money to strengthen the balance sheet and return cash to shareholders, the fast food giant was upgraded to "outperform" from "neutral" at Credit Suisse First Boston Tuesday.
"We think management is finally starting to put the important pieces together of reducing capital expenditures and focusing on building sales per store. That is what we believe is needed to drive a higher share price," CSFB analyst Janice Meyer told clients.
McDonald's shares, which experienced their biggest one-day jump since July on Monday, when it rose nearly 9 percent, added another 0.6 percent to $15.89 Tuesday.
Warnings weigh
Accredo Health (NasdaqNM:ACDO - News) plunged 45 percent to $13.90 after the Memphis, Tenn., provider of pharmacy services lowered its outlook for the fiscal year ending June 30, and said it's looking at the adequacy of the reserves on accounts receivables related to its acquisition of a unit of Gentiva Health last June.
The company now sees earnings of $1.20 to $1.25 per share on revenue of between $1.35 billion and $1.37 billion for the year. Accredo's previous forecast was for a profit of $1.33 to $1.38 per share on revenue of between $1.4 billion and $1.45 billion in the period.
Nautilus Group also tumbled after lowering its outlook for the first quarter. The maker of exercise equipment (NYSE:NLS - News) is forecasting earnings of 39 to 42 cents per share on sales of between $124 million and $129 million in the first quarter, below the 65 cents per share consensus estimate of analysts surveyed by Thomson First Call.
Shares of the company, which also slashed its outlook for the full year, were down 25 percent to $11.20.
Meanwhile, Acxiom warned that fiscal fourth quarter results would fall short of expectations due to the continued deterioration of the U.S. economy and the war with Iraq.
The provider of customer data integration technology said it now expects to earn 3 cents a share, excluding non-recurring items, on revenue of $238 million. Analysts surveyed by Multex had forecast earnings of 21 cents a share and revenue of $259.6 million, on average.
ACXM shares slumped 21 percent, to $13.10.
Late Monday, RF Micro Devices said it expected to post a wider than expected loss of 5 to 7 cents a share for its fiscal fourth quarter though revenue was seen coming in at $138.3 million, surpassing its target.
RF Micro shares (NasdaqNM:RFMD - News) slid 9 percent to $5.50.
Microchip (NasdaqNM:MCHP - News) also said it missed its previously reduced financial targets for the fourth quarter. Its shares dropped 11 percent to $18.38.
Declining confidence
The Conference Board reported Tuesday that chief executives' confidence in the nation's economy declined in the first quarter of 2003 and more of the business leaders are expecting further layoffs ahead.
The Conference Board's Measure of Business Confidence, which had rebounded to 58 in the final quarter of 2002, fell to 53 in the first quarter of 2003. A reading of more than 50 points reflects more positive than negative response.
"War, threats of terrorism, high energy costs and weak economic news have contributed to the decline in CEOs' confidence," said Lynn Franco, director of the Conference Board's Consumer Research Center.
According to the study, a rising number of CEOs said current economic conditions have worsened and project declines in employment levels. Still, the Conference Board said the CEOs generally remained upbeat even despite the generally less optimistic outlook for the overall economy. The measure on expectations for the next six months declined to 60 from 63.
Positive outlooks
Still, a number of companies remained confident about their prospects Tuesday.
EMC said it expects to match analysts' consensus earnings estimate of 1 cent a share for the first quarter with revenue in the range of $1.35 billion to $1.4 billion. Wall Street's consensus revenue estimate is $1.38 billion, according to Thomson First Call.
Still, EMC shares (NYSE:EMC - News) slipped 0.5 percent to $7.85.
Varian Medial jumped nearly 10 percent after the maker of radiation systems used in cancer treatment said its fiscal second-quarter profits would exceed earlier expectations.
The company (NYSE:VAR - News) said it now sees earnings up by 35 to 40 percent over the 34 cents per share reported in the year-ago quarter, ahead of its previous growth estimates of about 26 percent for the quarter.
And Granite Broadcasting (NasdaqSC:GBTVK - News) rose 6.5 percent after confirming its expectations for same-station net revenue growth of 2 to 5 percent in the first quarter and broadcast cash flow of $1.5 million to $2.6 million for the period.
Data watch
Inventories at U.S. wholesalers rose 0.3 percent in February to a level 1.8 percent higher than a year ago, the Commerce Department said Tuesday.
Wholesaler's sales rose 0.5 percent in February and were up 6.2 percent from February 2002. The inventory-to-sales ratio fell back to a record low 1.22 from 1.27. Durable goods sales fell 1.6 percent, due to a 4.3 percent decline in motor vehicles. Sales of nondurable goods rose 2.4 percent as sales of petroleum products soared 13.2 percent. Inventories of durable goods grew 0.7 percent while inventories of nondurable goods fell 0.3 percent.
In retail news, Bank of Tokyo-Mitsubishi/UBSW said retail chain store sales fell about 0.5 percent last week.
According to the weekly index, sales were below plan for most retailers last week due to the late Easter holiday, "less-than-favorable weather" and a continued "CNN effect" from consumers staying home to watch war coverage on TV.
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