Stocks Fall Despite Strong GDP News
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NEW YORK (AP) _ New data suggesting the economy is no longer in recession had little effect on Wall Street Friday, as cautious investors instead sent stocks sharply lower on more discouraging earnings _ this time from JDS Uniphase and VeriSign.
By late morning, the Dow Jones industrial average was down 73.62, or 0.7 percent, at 9,961.44, It was the second straight session that the index had dipped below the psychologically important 10,000 benchmark _ a level last seen in late February
Broader stock indicators experienced even sharper declines. The Nasdaq composite index slid 25.83, or 1.5 percent, to 1,687.87.
The Standard & Poor’s 500 index dropped 10.69, or 1.0 percent, to 1,080.79.
The Commerce Department reported that the nation’s gross domestic product _ the broadest measure of the economy’s health _ grew at an annual rate of 5.8 percent in the first quarter. It was the strongest showing since the last quarter of 1999, and raised hopes that the recession that began in March 2001 was over.
But the numbers failed to overcome negative momentum created by this month’s earnings reports, most of which have met expectations but failed to forecast significant improvements in business ahead. Investors, who have been watching economic numbers improve for months now, want to see a corresponding change in corporate profits. So far that hasn’t happened, giving many would-be buyers little incentive to put money in the market.
Analysts said investors might have also been discouraged by a slight decline in a key gauge of consumer sentiment. The University of Michigan’s index of consumer confidence was said to have fallen to 93.0 at the end of April, compared to 95.7 the prior month, according to Dow Jones News.
``Yes, the GDP numbers were good. But earnings remain lackluster and you still have a market that’s more apt to sell the rallies than buy on the pullbacks,″ said Bryan Piskorowski, market commentator at Prudential Securities. ``The sentiment is such that it takes a confluence of positive data to bring forth a rally, but it only takes one or two pieces of bad news to spark a selloff.″
VeriSign tumbled $8.29, or 45.5 percent, to $9.95 on first-quarter revenues that fell short of expectations because of soft demand. Investment firms including Merrill Lynch downgraded the company, which provides security for Internet and other transactions.
Shares of JDS Uniphase also fell 52 cents, or 10.3 percent, to $4.51 after the optical equipment maker announced a $4.3 billion loss for its third quarter and reduced its outlook for current business. The company is also cutting 2,000 more jobs.
And Disney fell 60 cents to $24.40 despite reporting second-quarter results ahead of expectations with the help of cost cutting and stronger-than-expected theme park attendance. Excluding one-time charges, Disney’s earnings were off 51 percent from the second quarter of 2001.
Declining issues led advancers more than 3 to 2 on the New York Stock Exchange. Volume came to 386.33 million shares, compared with 486.57 million at the same point Thursday.
The Russell 2000 index dropped 5.07 to 503.78.
Overseas, Japan’s Nikkei stock average fell 0.9 percent. In Europe, Germany’s DAX index advanced 0.6 percent, Britain’s FT-SE 100 was off 0.8 percent, and France’s CAC-40 gained 0.3 percent.
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