Dow plunges 295 points

Stocks fall on earnings warnings by high-profile companies

? Earnings warnings from companies including Philip Morris and Delta Air Lines sent stocks tumbling Friday, canceling out gains from a two-day rally in blue chips. The Dow Jones industrials plunged 295 points to post their fifth straight losing week.

Scaled-back profit forecasts for several high-profile companies discouraged investors, stifling the market’s ability to sustain its rally and leading portfolio managers to dump losing stocks, analysts said. Lackluster economic news also helped depress the market.

“Looking back at those two days of gains, no brave new world was created. We still had concerns about a war with Iraq, we still had earnings warnings,” said Bryan Piskorowski, market commentator at Prudential Securities.

“So once the bargain-hunting stopped, we were back to where we were,” he said. “Then (the declines) begin to snowball and no one is willing to be a hero,” he said.

The Dow fell 295.67, or 3.7 percent, to close at 7,701.45. The drop all but erased the average’s 314-point gain over the previous two sessions. It also pushed blue chips close to their four-year low of 7,683.13 reached on Tuesday.

Broader stock indicators also finished lower.

The Nasdaq composite index fell 22.45, or 1.8 percent, to 1,199.16. Tech stocks are now hovering near their six-year low of 1,182.17, also reached on Tuesday.

The Standard & Poor’s 500 index fell 27.58, or 3.2 percent, to 827.37.

The three major market gauges all finished the week lower for a fifth straight week, a distinction not seen since the five weeks ending May 24 to June 21. For the week, the Dow lost 3.6 percent, the Nasdaq declined 1.8 percent, and the S&P fell 2.1 percent.

Analysts said some of Friday’s declines might have been a result of “window-dressing,” or an attempt by institutional investors to make their holdings look as good as possible at a quarter’s end. The losses were exacerbated by two economic reports that offered little reassurance about the economy.

The Commerce Department reported that the economy grew at an annual rate of 1.3 percent in the spring, slightly better than previous estimates but significantly weaker than in the first quarter of the year.

In addition, a University of Michigan survey released Friday also reportedly showed consumer confidence declining during September, according to Dow Jones News Service.

The reports, while not a surprise, confirmed doubts among investors that the economic recovery is shaky, analysts said. The anxiety also may increase in the coming week, when key reports on manufacturing and employment are released.

“None of the recent data … suggests that we have a strong economic turning point here,” said Chris Wolfe, equity strategist for the J.P. Morgan private bank. “The presumption (among investors) is that consumer spending is set to slow down.”

General Electric fell $1.92 to $24.47 after a pair of analysts downgraded the company’s stock.

Philip Morris fell $4.87 to $37.86, after it warned late Thursday that its full-year earnings would fall short of expectations.

Delta Air Lines shares fell $2.81 to $8.69 after the company warned that its third quarter results would be weaker than previous estimates.

“The fact that you have a disproportionate number of companies coming up with negative pre-announcements not anticipated by analysts prior to the last couple of weeks makes it a much more difficult environment,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.

“What I’m seeing here is, when we get to the bottoms again … There is a tendency for the market to recover somewhat, but there is a lack of traction underneath because there’s no follow-through,” he said.

SBC Communications fell $1.75 to $20.15 following the company’s announcement that it will cut another 11,000 jobs and slash capital spending.

Citigroup fell 49 cents to $29.02 after reports that it is trying to reach a settlement with federal regulators that would end investigations of its stock research operations.

Declining issues outnumbered advancers 10 to 3 on the New York Stock Exchange. Volume was moderate 1.49 billion shares, compared with 1.62 billion traded Thursday.

The Russell 2000 index, which tracks smaller company stocks, fell 8.91 points, or 2.4 percent, to 361.78.

Overseas, Japan’s Nikkei stock average rose 2.3 percent. In Europe, Germany’s DAX index fell 3.4 percent, France’s CAC-40 fell 0.4 percent, and Britain’s FTSE 100 rose 1.5 percent.