US stocks nosedive, Microsoft triggers new worries

Haitham Haddadin

NEW YORK: Stocks fell in late morning trading on Friday as earnings jitters

resurfaced with software giant Microsoft Corp warning of slower growth and a

host of other firms handing in lackluster reports. "The net result is that

people are less optimistic than before Microsoft had their comments," said

Howard Kornblue, portfolio manager with ING Pilgrim, which manages $18 billion.

"True we have interest rate cuts (from the Federal Reserve), but the

outlook for corporate profits is probably worse than you and I were thinking

originally," he added. The tech-laced Nasdaq Composite Index lost 18.57

points, or 0.91 per cent, at 2,028.02.

The Dow Jones industrial average fell 40.9 points, or 0.39 per cent, to

10,569.10 and the broad Standard & Poor's 500 Index was down 3.00 points, or

0.25 per cent, at 1,212.02. An array of downbeat earnings and forecasts hit the

market after the close on Thursday from tech leaders such as Microsoft, top

telecom equipment maker Nortel Networks and computer maker Gateway Inc.

Stocks showed some relative improvement at times, with the leading market

indexes cutting losses, following a number of upbeat statements from the Group

of Seven meeting in Genoa, Italy.

G7 leaders agreed there was scope for strong global recovery after a tough

six months for the world economy, a Japanese official said. Group officials were

fine-tuning a statement from their leaders expressing near optimism on the

economy and pointing towards US turnaround between the third and fourth

quarters.

"Any official imprint that the US economy could be recovering is

welcomed by the market," said Milton Ezrati, senior economic strategist at

Lord Abbett & Co. "But the market has also learned to discount these

statements, as they usually tend to be positive."

Microsoft lost $4.21 at $68.36. The company posted a profit that was within

estimates, thanks to robust software sales but warned revenue growth would slow

in the current quarter amid still-sluggish demand for personal computers. Nortel

Networks of Canada reported a whopping loss of $19.4 billion as sales sank. It

did not give a forecast but said its financial health has improved. Nortel's

US-listed shares were off 5 cents at $7.70, after falling by 4 percent earlier.

Gateway sank to a new 52-week low of $11.80 after it reported a loss. Gateway

was off $2.60 to $11.99 on the New York Stock Exchange. Vitesse Semiconductor

Corp. shed 56 cents to $18.05 after tumbling 7 percent. The communications

chipmaker reported a loss of $69.6 million, blaming order cancellations and

weaker demand for electronics.

Network computer maker Sun Microsystems Inc. rose. It posted its first loss

since 1989 and said the economy was too unstable to make a precise prediction

for the current quarter. But the company met its own lowered operating profit

target for the fiscal fourth quarter.

The stock rose 81 cents to $15.25 on the Nasdaq. Online auction site eBay

Inc. added $2.70 to $67.10 after posting a stellar quarter with sales and

earnings up sharply. Its results bested expectations and the company raised its

estimates for the rest of the year.

(C) Reuters Limited 2001