Closing Market Report

Star-Bulletin news services

Tuesday, June 26, 2001

Stocks end mixed, hurt
by big profit warnings

By Amy Baldwin
Associated Press

NEW YORK >> Blue chips fell for the third straight day today, toppling on a swath of profit warnings and layoff announcements from big companies, the biggest being Merrill Lynch.

The market was also awaiting a decision on interest rates by the Federal Reserve, which was meeting today and tomorrow and is expected to cut rates by 0.25 percentage report tomorrow. The central bank has already cut rates five times this year, a total of 2.5 percentage points, to reinvigorate the economy.

The Dow Jones industrial average ended today's session down 31.74 at 10,472.48, after falling more than 100 points both Friday and yesterday.

The market's broader indicators were mixed. The Nasdaq composite index advanced 13.75 to 2,064.62, while the Standard & Poor's 500 index slipped 1.84 to 1,216.76.

Advancers outnumbered decliners on the New York Stock Exchange, with 1,800 advancing and 1,301 dropping. Volume was 1.19 billion shares, up from 1.03 billion yesterday.

The NYSE composite index dropped 1.31 to 618.82, the American Stock Exchange composite index rose 3.51 to 906.39.

Smaller companies fared better with the Russell 2000 index rising 6.63 to 490.82. Analysts have said smaller companies stand to benefit most from lower interest rates.

The price of the Treasury's 10-year note was down 23/32 to 98 10/32. Its yield rose to 5.22, up 10 basis points. The 30-year note is priced at 96, down 30.32. Its yield is at 5.65, up 7 basis points.

While prior rate reductions have inspired rallies, analysts say investors now need signs that companies are beginning to benefit from the lower borrowing costs before they start buying again.

"The issue is not will the Federal Reserve cut interest rates. The issue is: Will there be a payoff, and if so when?" said Hugh Johnson, chief investment officer for First Albany.

The market punished the latest companies to announce profit warnings, including Merrill Lynch, down $7.54 at $58.91. The brokerage warned that second-quarter profits have suffered sluggish equity volume and will be 52 cents to 57 cents a share, missing the 82 cents a share Wall Street had expected. Merrill Lynch also said it has cut 3,300 jobs this year.

Outback Steakhouse fell 70 cents to $27.25 after announcing it will miss analysts' second-quarter earnings expectation of 52 cents a share.

Japan's Nikkei ended up 0.6 percent, while Hong Kong's Hang Seng fell 1.6 percent.

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