Stocks Tumble on Gloomy Profit Outlooks

Stocks fell Monday after two leading investment firms cut their earnings forecast for Intel, saying a price war on computer chips could limit the semiconductor giant's earnings and renewing fears about corporate profits in general.

The blue-chip Dow Jones industrial average tumbled 111.47 points to end the day at 10,401.31, while the technology-heavy Nasdaq Composite Index dropped 32.08 points to 2,034.25.

The broader Standard & Poor's 500 Index fell 13.87 points to 1,200.48.

Semiconductor stocks slumped after Salomon Smith Barney said Intel's average processor contract price was lower than anticipated, exacerbating worries price wars could hurt profit margins. Salomon analyst Jon Joseph cut his forecast for Intel's 2001 and 2002 per-share profits by 13 percent and seven percent, respectively.

Lehman Brothers also lowered estimates for Intel's average selling price and unit shipments.

Intel fell 4.4 percent, or $1.40, to $30.28 and Intel rival Advanced Micro Devices Inc. fell $1.63, or 8.5 percent, to $17.62.

The weak economy is hurting corporate profits and spurring layoffs. U.S. job cuts announcements soared 65 percent to a record of 206,000 in July, according to outplacement firm Challenger, Gray & Christmas, Inc. That was up sharply from 125,000 announced layoffs in June.

``Companies are looking at their staffing needs for the balance of 2001 and the numbers do not present a very positive picture,'' said John Challenger, chief executive of Challenger, Gray & Christmas.

Wall Street also seemed wary of taking large positions ahead of economic data and a closely watched earnings report from Cisco System expected later this week.

Investors will watch retailers' sales for an indication of how well consumer spending is holding up. On Wednesday, data from the Federal Reserve's latest anecdotal survey of national economic conditions, known as the Beige Book, may help illuminate an uncertain outlook.

Wall Street will also scrutinize Cisco's results expected after Tuesday's close for signs of whether the business outlook is improving for large technology firms.

Cisco System Inc. slipped 37 cents to $19.68. The Web gear maker is expected to report its quarterly results after Tuesday's close and investors said they'll be watching closely for signs of whether the business outlook is improving.

``People are nervous ahead of the Cisco earnings report because it's a bellwether. Whatever Cisco says is newsworthy for all types of companies,'' said Michael Weiner, a fund manager with Banc One Investment Advisors.

A dearth of market-moving news had traders twiddling their thumbs as a mere 1.07 billion shares traded on the Nasdaq market, the second lowest volume day so far this year behind Friday's low of 868 million shares.

US Airways rose 87 cents to $17.75 after Global Airlines, a New York-based holding company, said wants to buy the airlines for $1.8 billion, or $27 a share in cash and stock. That's a 60 percent premium to US Airways' stock at Friday's close.

U.S. satellite TV provider EchoStar Communications Corp. slipped $1.65 to $28.79 after announcing a $30.4 billion stock offer for Hughes Electronics Corp. and its DirecTV network.

EchoStar said it was proposing to offer 0.75 of its shares for each share of the General Motors Corp.-owned Hughes unit, valuing the unit at $22.83 per share, an 18 percent premium to Hughes' closing price of $19.36 on Friday. Hughes rose 67 cents to $20.03.

Defense contractor General Dynamics said it would buy Motorola Inc.'s Integrated Information Systems Group for $825 million.

The transaction has been approved by the boards of both companies and is subject to normal regulatory approval. The deal is expected to close within 60 days. Motorola slipped 3 cents to $18.60, while General Dynamics dropped 86 cents to $81.81.

Investors are closely watching retailers' same-store sales reports for an indication of how well consumer spending is holding up and shareholders punished companies whose reports hinted at trouble.

Consumer electronics retailer RadioShack Corp. slumped $2.35 to $26.55 after its sales fell 6 percent in July.

Genesco Inc. plunged $5.48, or 20 percent, to $22 after the footwear maker and retailer said it sees earnings for the year falling below analysts' expectations as the challenging economic environment pounds sales of some of its high-end lines.

The Russell 2000 index, which measures the performance of smaller company stocks, fell 6.19 to 480.96.

Overseas markets were mixed Monday. Japan's Nikkei stock average finished the day off essentially unchanged. France's CAC-40 advanced 0.7 percent, Britain's FT-SE 100 fell 0.4 percent, and Germany's DAX index inched up 0.2 percent.

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