Stocks fell Thursday, with technology shares leading the slide after networking heavyweight Juniper Networks rattled Wall Street with an earnings warning.
“We are in prime earnings warnings season,” said Alan Ruskin, research director at 4Cast Ltd., an economic research firm in New York. “The market wants to be bullish, but it’s getting beaten down by earnings every now and again.”
Analysts are forecasting a 20.3 percent drop in earnings of the Standard & Poor’s 500 companies in the fourth quarter, but that could fall further, making it the worst earnings drop of the year, according to Thomson Financial/First Call.
“There is already a bit of anticipation built into some equity prices … and as these corporate profit warnings come out, people get jittery and say, `Oh, gosh, things aren’t necessarily going to turn around,'” said Richard Babson, chairman of Babson-United Investment Advisors.
The Dow Jones industrial average fell 85.31 points, to 9985.18, ending a four-session winning streak. The broader Standard & Poor’s 500 index dropped 9.63 points, to 1139.93, while the technology-laced Nasdaq composite index fell 64.35 points, or 3.2 percent, to 1918.54.
Tech stocks were hit when networking equipment-maker Juniper fell $4.08, to $18.85, after reducing its fourth-quarter revenue and profit outlook because of increasing caution among its customers.
The selling spread to other technology issues, which were already under pressure from profit-taking and fears a turnaround would take longer than expected. Rival Cisco Systems dropped $1.06, to $18.29, while bellwether Intel slipped $1.07 to $31.98.
The closely watched Philadelphia semiconductor index tumbled 5.6 percent, to 507.60.
“We’d already seen a few warnings in the semiconductor industry and now it’s the networking sectors,” said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. “All of this outlines the fact that the earnings picture is still unclear for the next quarter or so.”
Local tech issues suffered along with the sector as a whole. Schaumburg-based Motorola lost 3.2 percent, to $15.25, and Vernon Hills-based CDW Computer Centers slid 3.7 percent, to $52.06. Chicago-based Methode Electronics closed down 5 cents, to $7.20, its low of the day, despite an upgrade from analysts at Robert W. Baird. Shares of Itasca-based Arthur J. Gallagher fell 17 cents, to $34.45, despite an analyst upgrade.
In earnings news, shares of Wood Dale-based AAR rose 9 cents, to $8.85, despite reporting a fiscal second-quarter loss of 10 cents per share, excluding substantial one-time items. After the close of regular Nasdaq trading, Chicago-based USFreightways said it expects fourth-quarter earnings from operations of 32 cents to 42 cents a share; analysts had been expecting 42 cents.
On Friday, traders will continue to monitor Argentina’s deepening economic and political instability.
“Everybody knew that there was a major problem over there in Argentina. They’re just hopeful that it doesn’t spread to all the other countries over in that particular area,” said Lance Zipper, managing director of equity trading at Brean Murray & Co. “Everybody’s going to be watching it. It’s another piece of nervousness that’s hanging in the market.”
Trading volume is expected to drop during the holidays, but the market could be volatile Friday because of the so-called “triple witching” session–the quarterly expiration of index futures and index and stock options.
Historically, triple-witching weeks are volatile as fund managers sell and buy stocks to adjust their portfolios.
