Saturday, September 09, 2000

Earnings warnings put damper on stocks

By Lisa Singhania
The Associated Press

        NEW YORK — With the Federal Reserve unlikely to seek another interest rate increase for at least a few months, investors might think the stock market — and their portfolios — are likely to be more secure for a while.

        Think again. With third-quarter earnings reports coming out in less than a month, more than a dozen companies warned this past week that results will be lower than expected. Investors reacted quickly and nega tively, particularly against high-tech stocks that had recently enjoyed a recovery.

        The Nasdaq Composite Index dropped below 4000 for the first time since Aug. 22 — sinking 119.94, or 2.9 percent, to 3978.41. The Standard & Poor's 500 Index fell 8.01, or 0.5 percent, to 1494.50, and the Dow Jones Industrial Average lost 39.22, or 0.4 percent, to 11,220.65.

        Analysts warn investors to expect more selling.

        “Now that we've all concluded the Fed's out of the picture, the focus is going to be on worries about earnings and the economic slowdown,” said John Cleland, chief investment strategist at Security Benefit Group in Topeka, Kan.

        “There's going to be a lot of volatility in the market over the next few months.”

        September is historically a poor month for the stock market, in part because of what's known as “warnings season,” and the uncertainty from upcoming elections.

        But this year, the pressure is especially strong. In addi tion to the slowdown in the economy, many companies also face the difficult — and perhaps impossible — task of matching the record earnings of a year ago.

        At the same time, investors have become more focused on the bottom line.

        “Clearly the market in the last six months has been obsessed with interest rates and now it's going to be obsessed with the slowdown in profits that we will start seeing,” said Tom Galvin, chief investment officer at Donald, Lufkin & Jenrette Securities.


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