Stocks Stage Surprise Turnaround Tuesday
NEW YORK – Stocks were hit early Tuesday by mobile phone giant Nokia Corp.'s surprise announcement of lower profit and sales growth -- but staged a spectacular recovery late in the session.
For most of the day, the major indexes remained firmly in negative territory. But by late afternoon, they had managed a stunning turnaround.
The blue-chip Dow Jones industrial average gained 26.29 points to close at 10,948.38 after losing more than 130 points, while the technology-laced Nasdaq Composite Index lost a mere 0.78 point at 2,170.00 after dropping more than 60 points.
The broader Standard & Poor's 500 Index gained 1.47 points to 1,255.89.
``It looks like a better finish than start,'' said John Davidson, chief investment officer at Circle Trust Co., which has $8 billion in total assets, as the major indexes improved late in the session. ``Most people have confidence that ultimately it will turn, but as of yet we have no signs of a turn.''
``There was a negative consensus out there with Nokia and other downgrades and so we got to levels that were compelling to investors,'' said Jim Herrick, managing director in charge of listed trading at Robert W. Baird & Co. ``There's bargain-hunting coming in.''
Finland's Nokia, the world's largest mobile phone maker, warned that slower-than-expected market growth would lead to lower earnings. It also said it expected second-quarter sales growth of below 10 percent year-on-year compared to earlier estimates of 20 percent.
``The Nokia warning sent the market into a tailspin,'' said Bill Meehan, chief market analyst at Cantor Fitzgerald, commenting on the deterioration in leading equity index futures after the news hit screens.
Nokia's U.S.-listed shares fell $5.95 to $22.76, a loss of nearly 21 percent.
Nokia's news hurt companies that supply it with equipment to make mobile phones. Rival Ericsson, the most actively traded issue on Nasdaq, fell 43 cents to $5.07, or 8 percent, and European bourses were also dragged lower by the news.
The North American telecom index lost 1.83 percent.Qualcomm fell $4 to $55.78, while Triquint Semiconductor slipped $1.19 to $16.16.
But the overall market began to recover late in the session as investors got some positive news. Dell Computer, for example, rose 84 cents to $26.10, after its shares were upgraded by Morgan Stanley, which said the personal computer market is stabilizing.
Other tech issues seemed to benefit from the prospect that demand for their products will improve. Hewlett-Packard finished up 50 cents at $28.30.
However, analysts said the biggest factor behind the last-minute recovery was simply that prices have fallen sharply in recent weeks, and investors, while still concerned about the outlook for earnings, felt compelled to place a few bets.
``We keep hearing 'The bottom is here, the bottom is here,' then we get a little rally,'' said Richard A. Dickson, a technical analyst at Hilliard Lyons in Louisville, Ky.
But he said the upturn could be short-lived because of unclear information on which way the economy is heading.
``In terms of consistency, there is nothing in the economic numbers that points to either weakness or strength,'' Dickson said. ``Nobody really has a clear picture.''
In the past three weeks, the market steadily gave back gains reaped in its April-May rally. Unconvinced that the economy has started to recover, investors have been selling stocks, or at least staying on the sidelines, which has kept trading volume light in recent sessions.
Initially when the market began slipping in late May, analysts said the pullback was normal following the huge run-up, in which Dow gained about 20 percent. Its recent drop has raised some concerns that there was more than just a normal correction under way.
Harrington said he was concerned that stocks are falling even after making positive announcements. For example, Intel fell 20 cents to $30.13, despite announcing last week that it still expects to meet earnings forecasts.
``That is a real warning sign,'' Harrington said.
Analysts were also concerned because investors were selling off safe, so-called defensive issues. J.P. Morgan Chase, a Dow stock, dropped 69 cents to $43.49.
The Dow was also hurt by Honeywell, which fell $1.78 to $43.47. Facing a Thursday deadline for making antitrust concessions in its $43 billion bid to acquire Honeywell, General Electric is under pressure by European regulators to sell more than half of Honeywell's aerospace division, according to a report published in The Wall Street Journal.
But GE rose $1.37 to $48.77 after trading down much of the session.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 1.13 billion shares, up from 853.21 million on Monday.
The Russell 2000 index, reflecting the performance of smaller company stocks, was unchanged at 506.93.
Overseas, Japan's Nikkei stock average fell 2.9 percent on a report released Monday that Japan's economy shrank 0.2 percent in the first quarter, dragged down by falling exports and business investment.
European markets also fell Tuesday. Germany's DAX index fell 1.7 percent, France's CAC-40 lost 2 percent, and Britain's FT-SE 100 declined 1 percent.
-- Reuters and the Associated Press contributed to this report.