Archive for Thursday, October 23, 2003

Stocks decline on earnings letdown

October 23, 2003

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— Investors sent stocks tumbling Wednesday, showing their dissatisfaction with third-quarter earnings after several pharmaceutical companies failed to meet Wall Street's expectations. The Dow Jones industrials dropped nearly 150 points, their biggest decline in nearly a month.

Disheartening results and less than dazzling forecasts prompted a sell-off in several sectors, notably health care and technology. Analysts said investors were feeling let down after a month of bidding stocks higher in anticipation of a robust quarter.

"We've had plenty of reason for profit-taking, and it's all because of these earnings," said Todd Clark, head of listed equity trading at Wells Fargo Securities.

Overall, the major companies that reported earnings during the past two weeks have either met or beaten analyst expectations, but investors have dumped stocks on hints of negativity -- including dimming outlooks for the fourth quarter and next year.

The market's sharp response to Wednesday's reports suggests fund managers may be trying to book profits, said Scott Wren, equity strategist for A.G. Edwards & Sons.

Analysts blamed some of the Dow's decline on a disappointing report from Merck & Co. Large pharmaceutical companies, which investors depended on for predictable earnings during the economic downturn, are likely to lose their appeal during the recovery, said Kevin Caron, market strategist at Ryan, Beck & Co.

Merck, which missed analysts' forecasts by 3 cents a share and announced plans to cut about 4,400 jobs, declined $3.19 or 6.5 percent, to close at $45.72.

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