Stocks tumble on outlooks from Microsoft, IBM

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Posted 1:54PM on Friday, January 18, 2002

NEW YORK - Cautious outlooks from Microsoft and IBM sent technology stocks sharply lower Friday as investors worried that an economic recovery might be further delayed. By early afternoon, the Dow Jones industrial average was off 59.24, or 0.6 percent, at 9,790.80. The selling had the biggest effect on the technology-driven Nasdaq composite index, which lost 36.33, or 1.8 percent, to 1,949.49. The Standard & Poor's 500 index dropped 9.11, or 0.8 percent, to 1,129.77. The downturn reflected the market's disappointment with statements from IBM and Microsoft late Thursday in which both companies said they don't know if a recovery has started. Although the high-tech bellwethers beat earnings expectations, that wasn't enough for Wall Street, which had been buying on the assumption the companies would confirm a turnaround had started to take shape. "I don't think people were expecting lots of positive comments about an economic recovery, but they were hoping for some glimmer of hope, and so far management has not provided that," said John Forelli, portfolio manager for John Hancock Core Value Fund. "So people are taking profits instead of buying stocks." IBM fell $6.21 to $113.69 while Microsoft tumbled $3.22 to $66.64. The selling spread to other technology issues as well, including Intel which had issued a similarly cloudy forecast earlier this week. The chipmaker fell 82 cents to $33.71. Pharmaceutical stocks fared slightly better, as investors looked for less risky investments. Johnson & Johnson was up 3 cents at $59.86. The selloff reflected Wall Street's growing concerns that a recovery might not occur in the first half of this year after all. Stocks rebounded from the post-terror attack selloff in the last three months of 2001, but have since struggled to move and stay much higher. Analysts say Wall Street is waiting for more proof that business conditions are improving, particularly in the tech sector which was responsible for much of the growth in the last bull market. With companies like Microsoft, IBM and Intel unable to predict a recovery, investors are questioning whether the market's advance might have been too rapid. As a result, they are selling stocks to lock in gains rather than risk losing them waiting for better news. Declining issues led advancers 7 to 5 on the New York Stock Exchange. Volume came to 737.28 million shares, compared with 743.29 million at the same point Thursday. The Russell 2000 index dropped 3.53 to 478.86. Overseas, Japan's Nikkei stock average gained 1.6 percent. In Europe, Germany's DAX index slipped 0.5 percent, Britain's FT-SE 100 was down 0.2 percent, and France's CAC-40 was off 0.6 percent.