US stocks slide on earnings jitters

By Elizabeth Lazarowitz

NEW YORK: Stocks fell in early morning trading on Thursday as company-specific news whipped the technology sector, one day after the Federal Reserve left interest rates unchanged but warned of further rate hikes.

Wall Street's cheer over the Fed decision appeared to have evaporated and traders had turned their focus to the corporate earnings picture, market analysts said. Investors were shaken after computer services supplier Unisys Corp. said second-quarter its operating earnings could be as low as half of Wall Street expectations, due in part to weak sales and currency fluctuations. Unisys fell 7-1/8 to 16-1/8.

"I guess now everybody is nervous about earnings," said Paul Cox, manager of the Commerce Mid-Cap Fund at Commerce Bank in St. Louis, Mo. The Dow Jones industrial average fell 108 points, or 1.0 per cent, to 10,418. High tech heavyweights such as International Business Machines and Hewlett-Packard led the blue-chip gauge lower.

The Nasdaq composite index tumbled 43 points, or 1.0 per cent, to 3,896. The Standard & Poor's 500 index, a broader measure of the market, fell 9 points, or 0.6 per cent to 1,446.

At the conclusion of its two-day policy-setting meeting on Wednesday, the Fed pointed optimistically to recent data indicating a slower pace of economic growth, but it also said signs of a slowdown were still "tentative and preliminary."

The central bank's action, which left the federal funds rate at 6.5 per cent, had been widely anticipated by Wall Street analysts and investors. Stocks spiked higher immediately following the Fed's decision, but gains were fleeting as the reality set in that Wall Street will be on Fed watch again for at least the next month.

Investors have also become increasingly nervous that rising interest rates will take a bite out of corporate profits as they slow growth. "We're quickly over the enthusiasm of no interest rate hike," said Barry Hyman, market strategist for Ehrenkrantz, King, Nussbaum, Inc.

Among the latest economic reports, the government's final revision to first quarter US gross domestic product data, put the GDP at 5.5 per cent, a touch higher than its preliminary estimate of 5.4 per cent. Wall Street had expected a final reading of 5.4 per cent.

At the same time, the US Labor Department reported jobless claims ticked slightly higher to 306,000 in the week ended June 24 from a revised 304,000 in the prior week.

(C) Reuters Limited 2000.