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Revenue woes hurt Wall St.
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October 17, 2000: 4:50 p.m. ET
Concerns about revenue growth sparks selling; Dow, Nasdaq take a tumble
By Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. stocks fell sharply Tuesday, with the Dow Jones industrials falling nearly 150 points and the Nasdaq composite index plunging more than 2 percent as investors remained skittish about corporate revenue growth.
"The current trend is down and that has not shown a sign of ending yet," said Terence Gabriel, stock market strategist at IDEAglobal.com. "It seems to be even beyond Intel. There is this general earnings jitters - that they may be decelerating and it's just a bearish sentiment with no faith in the future."
 Semiconductor and Internet stocks led the Nasdaq composite index lower, while the Dow Jones industrial average was pressured by financial issues.
The major U.S. indexes have churned since Labor Day amid concerns about revenue growth with negative pre-announcements setting off a sell-off but positive results still not enough to lift sentiment and attract buyers.
"The market is deadly afraid about what earnings are going to look like in the coming quarters," said Peter Cardillo, director of research at Westfalia Investments. "
The Dow Jones industrial average fell 149.09 to 10,089.71. The blue chip index is now off 12 percent from the start of the year.
The Nasdaq fell for the eighth time in nine sessions, shedding 76.35 to 3,213.93. The tech-heavy index is down 21 percent from the start of the year while the S&P 500 slid 24.64 to 1,349.97 and is down 8.2 percent on the year.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers 2,100 to 841 as more than 1.1 billion shares changed hands. On the Nasdaq, losers topped winners 2,782 to 1,223 as more than 1.9 billion shares were traded.
Treasury securities rose. The dollar was little changed versus both the euro and yen.
Enter the earnings
As corporate results take center stage, investors remain nervous about companies sustaining a strong pace of revenue growth.
"It needs to get through earnings season, get through the (presidential election) and have information on the economy that suggests continued growth and directionally toward the soft landing," Joe Battipaglia, chief investment strategist at Gruntal & Co., said about the stock market "You could have some very good momentum in November and December."
None of the earnings reports is likely to be more closely watched than those of leading computer chip maker Intel (INTC: Research, Estimates) and computer maker IBM (IBM: Research, Estimates), both reporting results after the market closes.
Intel warned last month that earnings and revenue will come in lower than expected, and additional concerns voiced Monday about its prospects from two prominent Wall Street analysts sent chip and technology stocks broadly lower.
 "Let's focus on the 'I's' -- IBM and Intel," said Art Hogan, chief market analyst at Jefferies & Co. "We've gone through a valuation compression from the peak to the trough in the Nasdaq and earnings are not going to slow down by 38 percent -- it's an emotional overreaction to oversell stocks."
Shares of Intel gained 50 cents to $36.19 while IBM gained $1.88 to $113.
Meanwhile, five Dow components posted results for the quarter that met or beat expectations.
Citigroup (C: Research, Estimates) slipped $1.44 to $49.38 after the No. 1 U.S. financial services company reported third-quarter earnings that beat estimates by 2 cents a share. UBS Warburg boosted its 2000 estimate to $2.77 a share from $2.70 and its 2001 estimate to $3.20 from $3.10.
Other financial issues also fell. American Express (AXP: Research, Estimates) shed $2 to $53.75, and J.P. Morgan (JPM: Research, Estimates) lost $5.38 to $137.63.
Honeywell (HON: Research, Estimates) fell 56 cents to $35.25 after meeting third-quarter earnings estimates despite disappointing revenue and warning that fourth-quarter results will come in at or just below current forecasts. The diversified manufacturer earned 76 cents a diluted share, excluding special items, which was in line with forecasts and up from net income of 68 cents a diluted share a year earlier.
Caterpillar (CAT: Research, Estimates) shed $1.25 cents to $30.50 after it posted a third-quarter profit of 62 cents a share, topping the forecast of 58 cent a share and the 28 cents a share earned a year earlier.
Some positive results were rewarded.
Philip Morris (MO: Research, Estimates) gained 94 cents to $31.69 after it reported third-quarter profit excluding one-time items of 99 cents a share, matching Wall Street forecasts. The maker of Marlboro cigarettes and Miller beer said sales edged up about 1 percent to $20.1 billion in the quarter.
Click here for a full look at corporate results
Semiconductor and Internet stocks led the Nasdaq lower. The selling spilled over from New York Stock Exchange listed shares. Micron Technologies (MU: Research, Estimates) fell $4.69 to $29 after Paine Webber downgraded the chip maker to "attractive" from "buy" and cut its fiscal 2001 earnings estimate. Applied Materials (AMAT: Research, Estimates) shed $4.25 to $44.50 after Credit Suisse First Boston slashed its price target and earnings estimate.
On the Internet front, Yahoo! (YHOO: Research, Estimates) tumbled $6.38 to $48.88, and Amazon.com (AMZN: Research, Estimates) fell $2.38 to $21.94.
"Until we get to that point where investors truly feel that there is no floor to stock prices, that isn't the full capitulation. There's still an unusual amount of optimism," said Ned Riley, chief investment strategist at State Street Global Advisors.
And oil prices reflected some of that optimism. Light crude oil on the New York Mercantile Exchange rose a modest 3 cents to $32.95 a barrel after the announcement of a cease-fire in the hostilities between Israel and Palestinians. Oil rose as high at $36.90 just last week amid growing violence in the Middle East.
When will the bear go into hibernation?
Investors continue to watch, wait and hope that the bear will retreat and stocks will head higher with some semblance of conviction. But analysts warn that the turnaround may not come until corporate quarterly results are finished being reported. Even then, the bounce higher is not expected to resemble last year's 45 percent jump in the fourth quarter of 1999.
"In January, April and July, the S&P 500 and the Nasdaq have closed down when earnings are reported but they tend to be better ahead of earnings so I don't expect October to be any different," said IDEAglobal's Gabriel. "It's a very volatile market and things shift very quickly but the expectations are just so high ahead of earnings."
And David Sowerby, senior portfolio manager at Loomis, Sayles, told CNNfn's Market Call that positive earnings reports will ultimately send stocks higher for 2000. (372K WAV) (372K AIFF).
A slowing economy and tight labor market have raised some concerns about how corporate profits will be affected. Wednesday's economic news may help give investors something to chew on. The Consumer Price Index (CPI), the nation's most closely watched inflation gauge, will be reported on Wednesday at 8:30 a.m. ET.
According to analysts polled by Briefing.com, the CPI for September is expected to rise to 0.3 percent from a revised negative 0.1 percent in August. The core CPI, which excludes volatile food and energy prices, is expected to remain unchanged at 0.2 percent. 
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