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Sept. 18, 2002, 8:22AM
U.S. stocks seen falling; JP Morgan, Oracle sour mood
Reuters News Service
NEW YORK -- Stocks are seen falling at today's open after disappointing profit forecasts from financial giant J.P. Morgan Chase & Co. Inc. and software maker Oracle Corp. take another whack at fragile investor sentiment.
"Oracle didn't give us terrific news, and J.P. Morgan cut guidance," said Arthur Hogan, chief market analyst at Jefferies & Co. "It's the season for pre-reporting. Momentum is to the downside, that's the path of least resistance."
J.P. Morgan, the No. 2 U.S. banking company, warned third-quarter earnings would land below the second-quarter level, stung by weak trading results and bad loans. Oracle, the world's No. 2 software maker, posted a 33 percent drop in first-quarter net profit and guided forecasts to the low end of estimates. J.P. Morgan, a Dow member, fell to $19.65 on Instinet from its $21.55 close. Oracle, a Nasdaq heavyweight, dropped to $8.26 from $9.03.
Famed candy maker Hershey Foods Corp. added another bitter note to the market and sank to $53.75 before the bell from its close of $73.81. Hershey ended its controversial search for a buyer after its controlling shareholder said it rejected all bids for the company, which had been expected to fetch up to $12 billion.
Earnings warning season, when companies warn of missing analysts' targets, heats up this week and is adding to investors' long list of worries. On Tuesday, economic data from the Federal Reserve showed that U.S. industrial output posted an unexpected decline in August, raising worries about the manufacturing sector's fragile rebound.
"Low volume over the past four weeks is indicative of the fact that a lot of people remain cautious," said Paul Cherney, an analyst at S&P MarketScope, who thinks a technical bounce during the session is possible.
Equity futures pointed to a drop at the open. December futures for the Standard & Poor's 500 fell 8 points to 864.50. Dow Jones Industrial futures sagged 66 points to 8,112, while Nasdaq 100 futures lost 11 points to 886.50. The Nasdaq 100 pre-market indicator fell 1.26 percent.
Equity futures barely budged after the release of fresh economic data.
U.S. consumer prices posted a larger-than-expected gain in August, boosted by higher energy prices and an upturn in tobacco prices, the federal government said.
The Labor Department said the Consumer Price Index, the most widely watched gauge of retail inflation pressures, rose 0.3 percent overall in August, its biggest gain since April. The index was also up 0.3 percent excluding food and energy prices, which can vary sharply on a monthly basis.
In a poll by Reuters, Wall Street analysts had projected the overall and core CPI to post smaller increases of only 0.2 percent in the month.
Another report showed the U.S. trade deficit shrank 6 percent in July to $34.55 billion, led by record exports of U.S. autos and auto parts and high volumes of civilian aircraft and food, feeds and beverages.
In other corporate news, photography leader Eastman Kodak Co. on Wednesday affirmed its earnings forecasts for the second half of 2002, citing benefits from cost cuts and other productivity improvements.
Bear Stearns Cos. Inc., a leading Wall Street firm, on Wednesday posted higher quarterly earnings as results were bolstered by stock trading commissions and reduced expenses.
The market got a brief shot of adrenaline on Tuesday after Iraq agreed to admit weapons inspectors, but the specter of a second Gulf War came back to haunt the market as the United States greeted Iraq's offer with deep skepticism.
U.S. President George W. Bush said on Wednesday he would unveil within days a proposed congressional resolution authorizing him to take action against Iraq.
Stocks sagged Tuesday as a stream of profit warnings from companies including fast food giant McDonald's Corp. and a surprise drop in industrial output doused an early rally sparked by Iraq's agreement to admit weapons inspectors.
The Dow Jones industrial average was down 172.63 points, or 2.06 percent, at 8,207.55. That was its lowest close since Aug. 5, when the average closed at 8,043.63.
The broader Standard & Poor's 500 Index was down 17.58 points, or 1.97 percent, at 873.52, its lowest close since Aug. 6. The technology-laced Nasdaq Composite Index was down 15.94 points, or 1.25 percent, at 1,259.94.
Stocks are on track to rack up their third-straight declining year -- the first time investors have seen such a stretch since 1941.