A seven-day stock market rally ended Friday after several old-line industrial companies, including Dole Food, reported disappointing earnings. Many computer-related and semiconductor stocks rose, but the tech gains weren't enough to offset losses elsewhere.
The Wired Index rose 0.31 to 388.06, while the Dow Jones Industrial Average fell 80.85 to 8452.29. The Nasdaq, laden with tech stocks, gave up 8.78 to 1693.86.
It was, of course, a matter of time before the rally petered out. In the past two weeks, several companies, including Microsoft and IBM, had reported stellar earnings, leading investors to expect the US economy to chug along just fine in the coming months. Until Friday, the Dow had gained almost 600 points in six days, its first solid winning streak in more than a year. But at these levels, further gains don't justify corporate earnings outlook, analysts said.
"It is going to take some sort of a shock to move the market forward," said Robert Froehlich, chief investment strategist at Scudder Kemper Investments. "That shock is going to be another interest rate cut from the [Federal Reserve] or from major players in Europe."
In the meantime, investors had to contend with the bad sort of shock. Several companies reported weaker than expected earnings because of the economic trouble in Asia and Russia.
For example, Franklin Resources, which runs international mutual funds, joined a growing list of companies getting burned by bad bets on securities tied to foreign markets. The company said its net income fell 10 percent as its assets shrank because of collapsing foreign equities. Franklin (BEN) dropped US$3.25 to $33.13.
Dole Food also was squished on Friday. The produce exporter and food processor said Russians ain't buying bananas. What's more, growers had a bumper crop this year, causing banana prices to collapse. Dole said it expects its third-quarter earnings to fall 35 percent. The stock (DOL) fell $5.06, or 15 percent, to $29.56.
It was a relatively good day for technology stocks, however, particularly semiconductor stocks.
First, Adaptec (ADPT), a maker of electronic components for computers and storage devices, said it managed to break even in the latest quarter because of cost cuts and more efficient operations. Wall Street had been expecting the Milpitas, California, company to report a loss. Adaptec surged $1.88, or 13 percent, to $15.88.
Second, Sue Billat, an influential analyst at BancAmerica Robertson Stephens, raised her investment rating on the entire semiconductor capital equipment industry -- the companies that make factory machines for chipmakers like Intel and Motorola. Billat said in her report that she believes the stabilization of memory chip prices and relatively strong results by Intel signal that the worst of a two-year downturn in the semiconductor business may be over. That means chipmakers could start buying all kinds of gadgets again.
"We believe the semiconductor capital equipment sector has hit bottom and will increasingly see technology buys from leading chipmakers," Billat said.
Applied Materials (AMAT), the biggest equipment maker, gained $1.06 to $33.94. ASM Lithography (ASMLF) rose 69 cents to $23.13. And KLA-Tencor (KLAC) advanced $1.38 to $33.94.
Gateway (GTW), the fourth largest American PC maker, managed to report better than expected earnings Thursday, despite plunging computer prices. Gateway itself gained $1.88 to $51.63.
Its PC brethren didn't fare as well. Dell Computer (DELL) lost 63 cents to $58.25. Apple Computer (AAPL) declined $1.25 to $35.50. And Intel (INTC), microprocessor supplier to the PC crowd, fell 13 cents to $87.25.
AMR, the parent company of American Airlines, got a boost when the US government said it would oppose a closer link between Northwest Airlines and Continental Airlines. The Justice Department filed a suit in Detroit, alleging Northwest's plan to buy a controlling stake in Continental would lead to higher prices and crummier service. Their rivals, needless to say, will benefit if Northwest and Continental's plans fall through. AMR (AMR) shares rose $1 to $60.81.
And First Data Corp. (FDC) shares surged after the credit-card processor reported better than expected earnings for the most recent quarter. More important, the company told investors that it will concentrate on its core businesses and fix technology and customer-service shortcomings that have been holding growth back. FDC jumped $3.25 to $25.81.
Financial columnist David Lazarus is on vacation.
Reuters contributed to this report.
