US stocks fell, sending the Standard & Poor's 500 Index to its biggest drop in three months, as EMC Corp and Advanced Micro Devices Inc said profits missed forecasts by half or more, undermining optimism that earnings will rebound this year.
Disappointing earnings "are likely to keep a cap on stock performance for the next several quarters," said Tom Van Leuven, a strategist at JP Morgan Securities Inc. "Expectations are still too high for the market in general and tech companies especially."
The S&P 500 fell 28.65, or 2.4 percent, to 1,190.59, for its biggest loss since April 3. The NASDAQ Composite Index dropped for a fourth day, falling 75.95, or 3.7 percent, to 2,004.16 and the Dow Jones Industrial Average sank 227.18, or 2.2 percent, to 10,252.68.
For the week the NASDAQ fell 7.2 percent as investors questioned whether the Federal Reserve's six interest-rate cuts in 2001 will spark a recovery in earnings this year. The S&P 500 lost 2.8 percent for the week while the Dow dropped 2.4 percent.
The NASDAQ has fallen 13 percent since late May as companies said profits this quarter would be lower than even the worst-case forecasts of analysts. The index, which is two-thirds technology stocks, gained as much as 41 percent from its 2 1/2-year low on April 4 as investors speculated that declining borrowing costs would spark a recovery in profits.
Of the 25 most active stocks, 24 declined, as did 81 of the 87 industry groups in the S&P 500.
More than 1 billion shares changed hands on the New York Stock Exchange, down 10 percent from the average for the past three months. Two stocks fell for every one that rose on the Big Board.
EMC slid US$8.43 to US$21.60 and was the most active stock. The No. 1 maker of corporate computer-data storage systems said second-quarter profit was as little as a quarter of analysts' forecasts.
* The S&P 500 fell 28.65, or 2.4 percent, to 1,190.59.
* The NASDAQ Composite Index fell 75.95, or 3.7 percent, to 2,004.16.
* The Dow Jones Industrial Average sank 227.18, or 2.2 percent, to 10,252.68.
The slowing economy caused big customers to scale back purchases and price competition cut into profits, EMC said, "The analysts weren't even close" with their estimates, said David Briggs, head of trading for Federated Investors Inc., which manages US$145 billion in Pittsburgh.
Advanced Micro slid US$7.84 to US$20.80. Intel Corp.'s main rival in the market for personal-computer processors cited falling chip prices for its disappointing sales and profit.
BMC Software Inc lost US$2.07 to US$20.68 after the maker of software for managing computer networks said slower-than-expected sales in Europe caused its fiscal first-quarter profit to trail forecasts.
"These are high-profile companies, particularly EMC," said Briggs.
Intel, the leading maker of computer microprocessors, lost US$1.36 to US$28.48. The Philadelphia Semiconductor Index lost 8.6 percent, its biggest drop in almost nine months.
In the storage industry, Emulex Corp, which makes networking switches and hubs used for data storage, fell US$6.85 to US$29.15 and Veritas Software Corp, which makes storage software, lost US$5.25 to US$57.01. Network Appliance Inc dropped US$.089 to US$11.78, and QLogic Corp lost US$7.46 to US$49.91.
Credit Suisse First Boston analyst Amit Chopra cut his rating on Emulex, Brocade Communications Systems Inc and McData Corp to "hold" from "buy," citing "continued erosion" in prices and slower spending by buyers of new computer equipment. Brocade slumped US$8.58 to US$32.19 and McData fell US$3.93 to US$17.97.
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