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US stocks fall as IBM earnings drag tech shares down Original Source Link: (May no longer be active)
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U.S. Stocks Fall as IBM Earnings Drag Technology Shares Lower
April 15 (Bloomberg) -- U.S. stocks fell as disappointing earnings from International Business Machines Corp. sparked losses in technology shares worldwide.
Benchmark indexes headed for their biggest weekly declines since August, led by companies such as General Motors Corp. and Alcoa Inc., on renewed concern that growth in the world's largest economy may be slowing. Stock markets in Asia and Europe dropped.
``The significance of IBM is more than just technology -- in the eyes of the market, it's indicative of the slowing economy,'' said Christopher Sheldon, who helps manage $76 billion as director of investment strategy at Mellon Private Wealth Management in Boston.
An improved profit outlook from General Electric Co. and better-than-expected earnings from Citigroup Inc. failed to boost the market.
The Dow Jones Industrial Average dropped 141.34, or 1.4 percent, to 10,137.41 as of 3:37 p.m. in New York. The Standard & Poor's 500 Index slid 14.03, or 1.2 percent, to 1148.02. The Nasdaq Composite Index slumped 29.20, or 1.5 percent, to 1917.51.
On the New York Stock Exchange, more than five stocks fell for every one that gained. Some 1.8 billion shares changed hands on the Big Board, 61 percent more than the same time a week ago.
Weekly Declines
Benchmark indexes are at 2005 lows and poised for weekly declines. The Nasdaq has retreated 4.1 percent since last Friday, the S&P 500 has dropped 2.8 percent and the Dow average is down 3.2 percent.
Losses were steep worldwide amid earnings shortfalls from Samsung Electronics Co. and Sony Corp.'s mobile-phone venture with Ericsson AB. The Morgan Stanley Capital International World Index, a global equity benchmark, tumbled 0.7 percent, its fourth consecutive retreat. Samsung declined 2.1 percent in Seoul, while Sony shares decreased 2.7 percent in Tokyo.
IBM, the world's biggest computer-services company, dropped $6.33, or 7.6 percent, to $77.31, heading for its biggest tumble in three years.
Revenue across the services, software and hardware units didn't meet projections in the final two weeks of the quarter as managers had difficulty closing deals, IBM said. Profit from continuing operations was 85 cents a share, missing the 90-cent average analyst estimate in a Thomson Financial survey.
Trend?
IBM ``darkens the whole picture,'' said Roberto Cominotto, who helps manage the equivalent of about $16 billion at Ehinger & Armand von Ernst AG in Zurich, a private bank which is part of UBS AG. ``People will have to wait to see if other results confirm this trend.''
Sun Microsystems Inc. dropped 31 cents to $3.65. The world's No. 3 maker of servers that run corporate networks yesterday reported a third-quarter loss, excluding some items, of 2 cents a share, missing the break-even estimate of analysts surveyed by Thomson.
A measure of technology shares sank 2.6 percent for the second-worst performance among 10 industry groups in the S&P 500. Dell Inc., the world's largest personal-computer maker, slid 40 cents to $35.78. Microsoft Corp., the world's largest software maker, lost 18 cents to $24.66.
Economic Data
Economic reports today reinforced concern that the economy is slowing.
Consumer confidence fell to the lowest since September 2003 as rising gasoline prices took a greater share of people's incomes. The University of Michigan's preliminary index of consumer sentiment dropped to 88.7 in April from 92.6. Economists polled by Bloomberg News expected a reading of 91.5.
Manufacturing in New York state increased at the slowest pace in two years. The Empire State Manufacturing Survey, which gives a clue to the current performance of U.S. industry, slumped to 3.1 this month, the lowest since the index showed contraction in April 2003, from 20.2 last month. Economists in a Bloomberg survey expected a reading of 18.
Industrial production rose 0.3 percent in March, matching estimates, while manufacturing produced fewer goods for the first time in six months. The gain in overall production compared with a 0.2 percent increase in February, the Federal Reserve said.
``Cyclical'' companies, or those most closely tied to economic growth, extended their losses.
GM, the world's biggest automaker, fell 47 cents to $26.19 and headed for a weekly decline of 11 percent. Alcoa, the No. 1 maker of aluminum, slipped 17 cents to $29.73 and was poised for a weekly loss of 6 percent. A gauge of automobile and auto-parts makers has tumbled 12 percent since April 8, while producers of raw materials have dropped 6.5 percent as a group.
A measure of energy shares lost 2.5 percent and is down 5.6 percent so far this week, reflecting the 5.2 percent drop in crude oil prices. Exxon Mobil Corp., the biggest publicly traded oil company, slid $1.65 to $57.10.
General Electric
GE, the largest company by market value, added 85 cents to $36.35. GE said 2005 earnings per share will be $1.78 to $1.83, an increase of 2 cents at the lower end of the range. First- quarter profit climbed 25 percent, the most in five periods, spurred by orders for industrial goods and a shift into businesses including health care and water treatment.
Citigroup advanced 85 cents to $46.25. The world's biggest financial-services company said first-quarter earnings increased to $1.04 a share on lower credit losses at its consumer-banking unit and investment gains. That surpassed the $1.02 average analyst estimate in a Thomson poll. Citigroup said it will increase share buybacks by up to $15 billion.
Drugmakers
Drug stocks rose after Eli Lilly & Co. won a court ruling that protects its best-selling schizophrenia treatment from generic competition.
Lilly jumped $4.40, or 8 percent, to $59.56 for the biggest rally in the S&P 500. A U.S. court upheld the patent on Lilly's $4.4 billion-a-year Zyprexa treatment until 2011.
Other drug shares gained. Pfizer Inc., whose cholesterol treatment Lipitor is in a patent case, climbed 42 cents to $27.87. Bristol-Myers Squibb Co., which is facing generic competition for four medicines by 2010, advanced 61 cents to $26.43.
Genentech Inc., the world's No. 2 biotechnology company, surged $9.92, or 17 percent, to $68.55. A study found the company's Avastin drug slowed the progression of breast cancer by about four months.
Mattel Inc., the world's largest toymaker, slumped $1.48 to $18.75. First-quarter profit was 2 cents a share, missing the average analyst estimate by a penny, after Barbie sales had their biggest decline in 18 months.
Last Updated: April 15, 2005 15:39 EDT
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