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Alcoa’s earnings
lead to declines
NEW YORK >> Investors lost some of their optimism about first-quarter earnings yesterday, sending stocks sliding on a disappointing profit report from Alcoa Inc. and a warning from Seagate Technology.
With many people away for the Passover and Easter holidays and no trading scheduled for Good Friday, volume was light, exaggerating some of the price moves. Investors who remained seemed chilled by the latest corporate news, and concerns about inflation, rising interest rates and fighting in Iraq added to the day's weakness.
Despite the retreat on Alcoa's announcement, analysts were upbeat about the market's long-term prospects, particularly after the major indexes regained so much of the ground lost in last month's correction. Few attached great significance to the stock skid.
"I think you're getting normal hesitation here before we attempt to attack the recovery highs," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn. "We have a solid foundation, the economy is strong, profits are rising, interest rates are low. ... I'd look at this market as a big tanker ship that is just taking some time to turn. One news item is not going to curtail that."
The Dow Jones industrial average slipped 90.66, or 0.9 percent, to 10,480.15.
The broader gauges were also lower. The Nasdaq composite index lost 9.66, or 0.5 percent, to 2,050.24. The Standard & Poor's 500 index declined 7.63, or 0.7 percent, to 1,140.53.
The price of the Treasury's 10-year note closed down 316 point, while its yield rose to 4.16 percent from 4.15 percent Tuesday. Two-year Treasury note prices were unchanged and their yield held at 1.84 percent.
"What we need is a first-quarter earnings surprise to the upside, something that's not already priced in ... to push us higher," said David Hegarty, head trader at Commerzbank Securities. "But in the meantime we're stuck in a range on the S&P."
A downbeat profit outlook from Nokia pressured prices for a second straight session, doing little to help investors regain their confidence about first-quarter results. Still, companies within the S&P 500 are expected to report 17 percent earnings growth on average, according to Thomson Financial. Some anticipate an average rise of up to 20 percent.
Another potential factor in the decline may be that investors are starting to consider the implications of last Friday's strong employment reading, and the prospect of rising interest rates. Markets don't absorb such changes with "computer speed," said Tracy Herrick, chief investment strategist at Jefferies & Co.
"I think investors still feel very good about earnings growth, that hasn't changed," Herrick said. "But that doesn't mean so much anymore."
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