H-P warning, bank
downgrade sink stocks

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By Amy Baldwin
Associated Press

NEW YORK >> A warning from Hewlett-Packard about future growth and concerns about weakness in the banking sector today prompted investors to cash in profits following Wall Street's four-session advance.

The Dow Jones industrial average ended 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.

Decliners outnumbered advancers slightly more than 3 to 2 on the New York Stock Exchange, with 1,877 down, 1,201 up and 201 unchanged. Volume was 1.06 billion shares vs. 1.11 billion yesterday.

The NYSE composite index fell 6.98 to 645.05, the American Stock Exchange composite index dropped 16.79 to 938.77 and the Russell 2000 index fell 3.90 to 512.58.

The Treasury's 10-year note rose 3/32 to 98-3/32; is yield fell 1 basis point to 5.25 percent. The 30-year bond rose 1/32 to 96-2/32; its yield was unchanged at 5.65 percent.

Hewlett-Packard fell $1.34 to $28.71 and weighed down much of the tech sector after CEO 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 the fiscal third quarter that ends July 31.

Although investors know earnings and revenue in general will continue to be weak throughout this year, H-P's warning was a reminder to remain cautious, analysts said.

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 economic slowdown, which has 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 Commission that second-quarter business has remained weak particularly weak 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, oil services company Halliburton fell $2.40 to $45, giving up gains made yesterday when OPEC agreed to leave its official oil output unchanged for the time being.

Likewise, steel stocks fell after soaring yesterday 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, today'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.