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Nasdaq nosedives
NEW YORK >> The Nasdaq composite index suffered its biggest loss in four months yesterday as investors irked by a cautious outlook from IBM and a profit warning from Nokia quickly sold off stocks. The Nasdaq dropped nearly 50 points in Wall Street's third straight day of declines.
"Everyone was expecting such a strong economic recovery. The earnings numbers have been good but tempered (about results) going forward. ... It is making the market step back here. The expectations were for so much with such a strong rally" since the middle of March, said Peter Dunay, chief market strategist at Wall Street Access, a New York-based brokerage firm.
The tech-dominated Nasdaq slid 2.9 percent. While IBM was the Dow Jones industrial average's biggest loser, the blue chips' loss was a modest 0.5 percent due to better-than-expected earnings from Caterpillar and United Technologies.
The Nasdaq closed down 49.95 at 1,698.02. The last time the Nasdaq had a bigger one-day loss was March 24, when it gave up 52.06 points to finish at 1,369.78.
The Dow fell 43.77 to 9,050.82.
The Standard & Poor's 500 index dropped 12.27, or 1.2 percent, to 981.73.
IBM fell $3.41 to $83.33. While IBM reported stronger-than-expected revenue and met earnings expectations, manage- ment's outlook was guarded.
Declining issues outnumbered advancers 3 to 1 on the New York Stock Exchange. Volume was heavy at 1.64 billion shares, just below Wednesday's 1.67 billion.
The Russell 2000 index, which tracks smaller company stocks, fell 13.75, or 2.9 percent, to 459.93. The NYSE composite index dropped 68.32 to 5,484.19. The American Stock Exchange composite index slipped 4.76 to 942.44.
Chief financial officer John Joyce said IBM was on track to meet profit and sales forecasts for the rest of the year. But he also said demand for tech products is "good, but not robust," a disappointment to investors hoping that companies would not only post strong second-quarter results but also raise their estimates for the third and fourth quarters.
"Since it felt like the rally (since March) was led so much by technology and the fact that the tech news is mixed, rather than constructive (evidence) of the recovery being just around the corner, it makes some sense for some profit taking. ... It is not necessarily a cheap sector," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank.
Indeed, the Nasdaq has had the biggest surge from the market's March 11 lows and remains up 33.6 percent from that point. The Dow is up nearly 20.3 percent from March 11, while the S&P is up 22.6 percent.
Nokia, which isn't part of the Dow, also pulled tech lower. Nokia fell $3.57 to $14.38 on a third-quarter profit warning and second-quarter earnings that fell 28 percent.
But Caterpillar, the biggest gainer among Dow stocks, climbed $5.25, or 9 percent, to $63.54 on second-quarter profits of $1.15 a share.
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