Earnings warnings,
layoffs send stock
market reeling

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By Amy Baldwin
Associated Press

NEW YORK >> Profit warnings from Ciena and Lucent Technologies, along with news of more layoffs and deteriorating retail sales, unnerved Wall Street today and prompted heavy selling.

The spate of negative news indicated that parts of the economy are likely to remain weak early in 2002, a disappointment to investors who have been buying stocks for weeks on increasing confidence of an impending economic recovery.

"People want to see some less negative profit numbers, as well as the first sign that profits are going to return to positive in the foreseeable future," said Ronald J. Hill, investment strategist at Brown Brothers Harriman & Co.

The Dow Jones industrial average closed down 128.36 at 9,766.45. The broader market, with a greater percentage of technology stocks than the Dow, suffered the most from the profit warnings. The Nasdaq composite index dropped 64.87 to 1,946.51 and the Standard & Poor's 500 index fell 17.69 to 1,119.38.

Decliners outnumbered advancers 2 to 1 on the New York Stock Exchange, with 2,049 down, 1,078 up and 211 unchanged. Volume was 1.42 billion shares vs. 1.35 billion yesterday. The NYSE composite index fell 6.12 to 569.27, the American Stock Exchange composite index lost 4.35 to 812.23 and the Russell 2000 index fell 6.64 to 468.67.

The Treasury's 2-year note fell 532 to 99 2932; its yield rose 8 basis points to 3.05 percent. The 10-year note fell 1932 to 99 1132; its yield gained 8 basis points to 5.08 percent. The 30-year bond fell 1732 to 98; its yield rose 4 basis points to 5.51 percent.

Technology suffered from a first-quarter earnings warning from Ciena, along with an announcement of 1,700 job cuts by Applied Materials yesterday after the market closed. Today, networker Ciena slid almost 17 percent, down $3.03 at $14.94, and chip equipment maker Applied Materials fell $3.79 to $41.08.

Other networking and semiconductor stocks fell. Broadcom dropped $3.48 to 42.47, and PMC-Sierra sank 16.5 percent, down $4.63 at $23.39.

Telecommunications stocks declined on a first-quarter profit warning from Lucent, which plunged nearly 16 percent, down $1.21 at $6.52. Competitor Motorola stumbled 77 cents to $16.15.

After the market closed, Oracle, the third-largest software maker, said fiscal second-quarter earnings dropped 12 percent and sales fell for a third straight quarter as customers tightened spending.

Net income fell to $549.5 million, or 10 cents a share, in the period ended Nov. 30 from $622.8 million, or 11 cents, in the year-earlier quarter. The earnings per share matched analysts' forecasts. Sales fell 11 percent to $2.36 billion from $2.66 billion.

Oracle shares, which have fallen 68 percent from an all-time closing high of $46.31 on Sept. 1, 2000, fell 43 cents to $14.67 before the announcement.

Among blue chips, investors punished retailers following a Commerce Department report that retail sales plunged 3.7 percent in November. Best Buy fell $1.15 to $66.05, and Wal-Mart declined 97 cents to $53.36.

Aetna slipped 30 cents to $30.74 after the health care provider announced it was cutting 6,000 jobs, or 16 percent of its work force. But there were some winners. United Technologies rose $1.15 to $60.65 and was the strongest Dow component after it raised its 2002 earnings projections.

There also was some positive economic news, but it failed to trigger much buying. The Labor Department reported that the number of Americans filing first-time claims for unemployment benefits fell by 86,000 last week, the biggest weekly decline in nine years.

A separate report showed wholesale prices fell for a second straight month, dropping 0.6 percent in November after a bigger 1.6 percent plunge in October.