NEW YORK — A warning from Hewlett-Packard about future growth and concerns about weakness in the banking sector Wednesday prompted investors to cash in profits following Wall Street’s four-session advance.
Although investors know earnings and revenue in general will continue to be weak throughout this year, Hewlett-Packard’s warning served as another reminder to remain cautious, analysts said.
The Dow Jones industrial average ended the session down 105.60 at 11,070.24.
Investors also pulled back from the broader market. The Nasdaq composite index fell 15.93 to 2,217.73, and the Standard & Poor’s 500 declined 13.54 to 1,270.03.
H-P fell $1.34 to $28.71, and weighed down much of the tech sector after chief executive Carly Fiorina said the company experienced soft sales in May, in part due to a global technology slowdown that is expanding beyond the United States and Europe. The company now expects revenue to be flat or down 5 percent for its fiscal third quarter that ends July 31.
Other tech shares that posted losses were Dell Computer, down 96 cents at $25.26, and Cisco Systems, off 78 cents at $20.76.
H-P’s announcement was akin to the litany of profit warnings earlier in the year that encouraged investors to unload shares or at least remain on the market’s sidelines.
“We should be expecting it. We know that second-quarter earnings are going to be as bad as the first,” said Arthur Hogan, chief market analyst at Jefferies & Co, of the H-P news.
But, “it is catching us off guard for some reason today,” he said.
The effects of the slowing economy, which have been unforgiving in some sectors, dragged down financial stocks. Bank One slipped 9 cents to $38.96 after UBS Warburg downgraded its rating on the stock.
J.P. Morgan Chase fell $1.66 to $46.84 after it acknowledged in a filing with the Securities and Exchange Committee that second-quarter business has remained weak, particularly for its investment banking operation.
“It appears there are plenty of corporate earnings disappointments ahead. In fact, truly nice surprises in corporate earnings seem to be an endangered species,” said Alan Ackerman, executive vice president of Fahnestock & Co.
In other blue chip sectors, such as oil and steel, profit taking was apparent. ExxonMobil fell $2.15 to $89.40, while oil services company Halliburton fell $2.40 to $45, giving up gains made Tuesday when OPEC agreed to leave its official oil output unchanged for the time being.
— The Associated Press
Likewise, steel stocks fell after soaring Tuesday when President Bush said his administration will seek approval for limits on steel imports. USX’s U.S. Steel Group fell 67 cents to $21.07.
After a stock market advance that started Thursday, Wednesday’s downturn reflected how confused investors are. They are worried about how long it will take for business to rebound while hoping that the worst of the slowdown is over.
Since late May, Wall Street has been bracing itself for the upcoming second-quarter earnings season, fearing weaker than expected results. Adding to investors’ wariness is the belief of analysts and corporate executives that the third quarter will be the year’s worst.
Despite investors’ fears, they allowed their optimism to spark a huge spring rally in which the major market indexes made significant strides, including the Dow’s reclamation of the 11,000 level it lost in September.
But some analysts say investors bid up the market too high and too soon.
“The market’s recent rallying was based on momentum, rather than good earnings reports,” said Ackerman of Fahnestock.
Declining issues outnumbered advancers slightly more than 3 to 2 on the New York Stock Exchange, where consolidated volume was 1.27 billion shares, compared with 1.34 billion on Tuesday.
The Russell 2000 index, the barometer of smaller company stocks, fell 3.90 to 512.58.
Overseas makets were mostly lower Wednesday. Japan’s Nikkei stock average slipped 0.1 percent, Britain’s FT-SE 100 and France’s CAC-40 were each off 0.3 percent, and Germany’s Germany’s DAX index fell 0.8 percent.
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