NEW YORK: Blue chips slipped on Friday, falling over a weak earnings forecast from the world's No. 1 home-improvement retailer Home Depot Inc, but the Nasdaq managed to eke out a tiny gain, extending its 2003 rally for a second day.
Home Depot, the world's third-biggest retailer in terms of sales, slashed its earnings outlook for fiscal 2002, saying the sales environment would remain difficult. Its shares tumbled 14%, and the news weighed on other retailers.
“Home Depot is a stock that is widely owned and widely followed. It's certainly not great news. There are no two ways about it,” said Brian Pears, head of equity trading at Victory Capital Management.
“But you have to look at the backdrop, and the backdrop is that we had a tremendous rally yesterday and we are not down that badly.”
The market's modest declines came a day after the Dow Jones industrial average and the broader Standard & Poor's 500 index scored their biggest one-day percentage gains since mid-October.
On Thursday, stocks had soared after a better-than-expected report on manufacturing stirred hopes that the struggling US economy is improving.
Though the session ended lower, many market watchers said they were impressed with Wall Street's performance in the second trading day of 2003.
“Given the fact that Home Depot is down like it is, the market is showing some resilience by how flat it is,” said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray.
The Dow Jones Industrial average lost 5.83 points, or 0.07%, to 8,601.69, according to the latest available data. The S&P 500 shed 0.44 of a point, or 0.05%, to 908.59. The technology-laced Nasdaq Composite Index ended up 2.23 points, or 0.16%, to 1,387.08, helped by a spurt of buying right before the close.
Advancing stocks edged out decliners by a ratio of about 18 to 15 on the New York Stock Exchange, while on the Nasdaq market decliners beat advancers by about 17 to 15. More than 1.12 billion shares changed hands on the Big Board, while more than 1.14 billion shares traded on the Nasdaq, according to the latest available figures.
For the week, the Dow average rose 3.6%, the S&P 500 gained 3.8%, and the Nasdaq advanced 2.9%.
Home Depot cut its earnings outlook for fiscal 2002, citing lower-than-expected holiday sales of power tools and hardware, and said it faced a “challenging environment” well into fiscal 2003. Its outlook sent shares of its biggest rival and several of its key suppliers down as well.
Home Depot shares topped the Big Board’s most-active list. Its stock fell 14%, or US$3.50, to end at US$21.38, after sinking as low as US$21.31, its lowest level in nearly five years.
Lowe’s Cos, the No 2 home improvement retailer after Home Depot, slumped US$2.43, or 6.2%, to end at US$36.92. Banc of America cut Lowe’s to “market performer” from “buy,” saying the do-it-yourself industry is approaching saturation.
Shares of tool maker Black and Decker Corp fell 9.5%, or US$4.20 to US$40.01, while Stanley Works, another tool maker, gave up 6.4% or US$2.30 to end at US$33.76. Shares of Masco Corp, a maker of cabinets and other home improvement products and a key Home Depot supplier, fell 7.7% or US$1.68 to US$20.28.
In other news, General Motors Corp reported its US vehicle sales jumped 36% in December over the same month a year ago – its best December sales since 1979. Cash rebates and some interest-free loans helped boost sales, the world’s biggest automaker said. Nevertheless, shares of GM, one of the 30 Dow stocks, slipped in sync with the overall market, falling 38 cents, or almost 1%, to US$38.54.
Cadence Design Systems Inc emerged as one of the session’s biggest losers, however. Cadence shares, which were the second-most active issue on the NYSE, tanked US$2.42, or almost 21%, to end at US$9.24. The company, which supplies software to design semiconductors, said it expects fourth-quarter earnings to be lower than Wall Street estimates as it streamlines operations.
Synopsys Inc, which makes software used for electronic design, sank US$4.67, or almost 10%, to US$42.25 as concerns about the company’s growth potential overshadowed the exit of its chief financial officer.
The session, however, had pockets of strength.
Eastman Kodak Co rallied US$1.59, or 4.4%, to end at US$37.43, making it the Dow’s top percentage gainer. DB Securities boosted its investment rating on Kodak, the No 1 maker of photographic film, to “buy” from “hold,” saying Kodak shares will likely rise as the company’s digital consumer strategy takes hold. – Reuters
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