Stocks Shellacked by Profit Warnings

NEW YORK – Stocks were slammed Friday by yet another wave of corporate earnings warnings and some worrisome U.S. employment data.

"It's just a really nasty one-two punch that has taken all the wind out of the sails of Wall Street," said Charles Payne, analyst at Wall Street Strategies, adding that investors are realizing Corporate America could be in trouble for some time.

The Dow Jones industrial average was particularly hard-hit, losing 227.18 points, or 2.17 percent, to 10,252.68, its lowest close in almost three months. All but three of its 30 components fell.

High-tech shares were hammered virtually across the board, pushing the technology-laced Nasdaq Composite Index downward for the fourth session in a row. The Nasdaq fell for a fourth straight session, dropping 75.95 points, or 3.65 percent, to 2,004.16.

The broader Standard & Poor's 500 Index lost 28.65 points, or 2.35 percent, to 1,190.59.

For the week, the Nasdaq slumped 7.2 percent, while the S&P 500 dropped 2.8 percent and the Dow slid 2.4 percent.

Trading was moderate on the New York Stock Exchange, with 1.04 billion shares changing hands, according to preliminary figures. The Nasdaq saw lighter-than-usual volume, with 1.43 billion shares traded, below June's average daily volume of 1.75 billion.

Data storage giant EMC tumbled $8.43, or 28 percent, to $21.60 and was the most-active on the NYSE after saying earnings will fall as much as 76 percent below Wall Street consensus estimates as cost-cutting failed to jump start demand for machines that store corporate digital information.

``EMC was a core holding, a must-own stock,'' said Frank Gretz, a market analyst with brokerage Shields & Co. ``It's one more piece of bad news that suggests a give up on the year-end recovery scenario.''

EMC rival computer giant International Business Machines slumped $5.60 to $106.50.

Microchip maker Advanced Micro Devices warned earnings will be almost 90 percent less that analysts had forecast, hurt by pricing pressure in the personal computer-chip and flash memory markets. Shares slumped $7.84, or more than 27 percent, to $20.80.

The news sent a shiver through the computer chip sector, and the Philadelphia Stock Exchange's semiconductor index dropped 8.6 percent. Computer chip heavyweight Intel Corp. fell $1.41 to $28.43.

Storage network companies such as Brocade Communications Systems Inc., Emulex Corp., and McData Corp. were all battered.

Systems management software maker BMC Software Inc. warned after Thursday's close that its results will fail to meet reduced expectations as more customers -- especially in Europe -- failed to close orders. Shares fell $2.07 to $20.68.

So far, companies have issued 1,053 statements about their second-quarter earnings, and of those, 68 percent have said their results will disappoint, according to Thomson Financial/First Call.

Analysts now expect companies in the S&P 500 to report profits fell 17.6 percent in the second quarter versus the prior year, the biggest drop since about the third quarter of 1991, the market tracking firm said.

The latest economic data did little to boost investors' mood. Although the unemployment rate ticked up modestly, the world's largest economy lost jobs at a much faster-than-expected pace in June, dampening hopes for a rapid recovery.

The U.S. Labor Department said June non-farm payrolls fell 114,000 -- a much bigger drop than the 44,000 forecast by economists in a Reuters poll.

The unemployment rate ticked up to 4.5 percent in June from 4.4 percent in May, falling shy of the 4.6 percent consensus forecast. Average hourly earnings increased 0.3 percent in June, in line with expectations.

``I just don't think we have any turnaround that's going to be evident until the second quarter of next year,'' said Ned Collins, head of trading at Daiwa Securities.

``People got very euphoric, and you had a rally in a bear market,'' Collins said. ``They got carried away thinking that it was all over with. How can it be over with when they haven't even stopped laying off all the people who are going to be laid off?''

Blue-chip Alcoa Inc. was the first of the Dow components to report second-quarter earnings. The world's largest aluminum producer said profit rose despite weak commodity prices and tough economic conditions in the United States and Europe. Alcoa erased early gains to fall 98 cents to $39.80.

The bad news was not reserved for technology shares. Casino operator Harrah's Entertainment Inc. and winemaker Robert Mondavi Corp. also both warned their results will disappoint. Harrah's fell $6.15 to $29.64 and Robert Mondavi dropped $1.22 to $39.88.

The Russell 2000 index fell 9.47, or 1.9 percent, to 483.26.

Overseas markets were also weak. Japan's Nikkei stock average fell 2.4 percent. In Europe, Germany's DAX index dropped 2.3 percent, Britain's FT-SE 100 lost 1.3 percent, and France's CAC-40 slipped 2.4 percent.

-- The Associated Press and Reuters contributed to this report.