NEW YORK: Blue chips scraped out modest gains on Friday as US-led forces closed in on Baghdad, but technology stocks slumped under the weight of earnings warnings from companies like software maker PeopleSoft Inc.
US troops seized Baghdad's international airport on Friday in their biggest victory of the war to oust Saddam Hussein, but the Iraqi government threatened to strike back with “non-conventional” means and the US military said it would take time to get a grip on the city.
“Nobody's going to make any bets on what's going to happen in Iraq,” said John O'Donoghue, co-head of listed trading at Credit Suisse First Boston. “It's just not prudent.”
The war is hitting corporate profits and the U.S. economy. PeopleSoft sank almost 13% to a session low of US$14.40 after warning the war was delaying corporate buying.
A government report on Friday showed the economy suffered a worse-than-expected drop of 108,000 in US non-farm payrolls in March as the conflict takes a toll on hiring. The nation's unemployment rate, however, held steady at 5.8% in March.
“Corporate spending got put on pause, business is still tough - and I don't like the stats I have been seeing on the economy,” said Donna Van Vlack, director of trading at Brandywine Asset Management, which oversees US$8bil.
The blue-chip Dow Jones industrial average rose 36.77 points, or 0.45%, to 8,277.15, rising late in the day after wobbling near unchanged much of the session. The broader Standard & Poor's 500 edged up 2.40 points, or 0.27%, to 878.85.
The technology-laced Nasdaq Composite Index fell 13.07 points, or 0.94%, to 1,383.51, based on the latest available figures.
A televised address by Saddam kept investors on edge on Friday. It appeared to be the first clear evidence he had survived a US bombing raid on the first night of the war aimed at killing him. Stocks had jumped in past sessions on hopes he had been hit in the initial US strike.
Advancing stocks beat out decliners by a ratio of 6 to 5 on the New York Stock Exchange, but losers edged out winners by 17 to 14 on Nasdaq. More than 1.23 billion shares changed hands on the Big Board and more than 1.35 billion on Nasdaq in moderate trading.
The major market gauges ended higher for the week as U.S.-led forces made swift headway in the march toward Baghdad. The Dow finished up 1.6%, the S&P added almost 1.8% and the Nasdaq rose 1% for the week.
Technology stocks took the most heat as corporate profit warnings hurt sentiment. PeopleSoft ranked among the most active shares on Nasdaq and skidded US$1.48 to end at US$15.02, down 9%. After regular trading ended on Thursday, the company warned its first-quarter earnings and revenues would fall short of estimates as the war in Iraq hit an already weakened economy.
PeopleSoft dragged other business software makers lower. Germany's SAP slumped 61 cents, or almost 3%, to US$19.95 in the United States. Siebel Systems Inc fell 41 cents, or 5%, to US$7.75.
Semiconductor stocks were under pressure after Europe's biggest chipmaker STMicroelectronics issued disappointing results as it took a hit from falling product prices and currency fluctuations. STM's US-traded shares fell 97 cents, or 4.9%, to US$18.76.
The Philadelphia Stock Exchange's semiconductor index lost 2.45%. Wireless chipmaker Texas Instruments Inc, which competes with STMicroelectronics in several markets, sank 85 cents, or 4.8%, to US$16.90. Chip giant Intel Corp fell 52 cents, or almost 3%, to US$17.05.
“We have reality starting to come into play, because we are heading into earnings season,” said Arnie Owen, managing director of equities at Roth Capital Partners.
Alcoa Inc, the world's biggest aluminium maker, rose 13 cents to US$20.04 ahead of its quarterly results due after the bell. The company, the first Dow component of the season to report earnings, said first-quarter results fell because of higher energy costs. The quarterly earnings season is set to kick into high gear in mid-April.
Altria Group ranked as the biggest loser on the Dow, falling US$1.40, or 4.7%, to US$28.30. Fitch Ratings cut the ratings of Altria and its units late on Thursday, citing the increased risk of litigation and losses facing the industry as a result of an Illinois court judgment against cigarette maker Philip Morris USA, now part of Altria.
Affymetrix Inc, which makes chips used for genetic research, tumbled US$9.67, or 34.5%, to US$18.33. The company warned its first-quarter revenue will fall far short of estimates, citing global economic weakness and cautious capital spending in the academic and biotech sectors.
One bright spot was AES Corp, which said it would launch a US$1bil offering of notes to pay off outstanding debt from a senior bank facility, a step that removes much of the uncertainty over the independent power producer's cash position. It jumped 70 cents, or 17.5%, to US$4.70. – Reuters