Wall Street: Wednesday close

By THIS IS MONEY
Updated:

 

INVESTORS lost a little more of their optimism about first-quarter earnings, sending stocks sliding on a disappointing profit report from Alcoa and a warning from Seagate Technology.

Despite the retreat on Alcoa's announcement, analysts were upbeat about the market's long-term prospects, particularly after the major indexes regained so much of the ground lost in last month's correction. Few attached great significance to the stock skid.

The Dow Jones industrial average slipped 90.66 to 10,480.15 and the Nasdaq composite index lost 9.66 to 2,050.24.

A downbeat profit outlook from Nokia pressured prices for a second straight session, doing little to help investors regain their confidence about first-quarter results.

Still, companies within the S&P 500 are expected to report 17% earnings growth on average, according to Thomson Financial. Some anticipate an average rise of up to 20%.

Another potential factor in the decline may be that investors are starting to consider the implications of last Friday's strong employment reading, and the prospect of rising interest rates. Markets don't absorb such changes with 'computer speed', said Tracy Herrick, chief investment strategist at Jefferies & Co.

'I think investors still feel very good about earnings growth, that hasn't changed,' Herrick said. 'But that doesn't mean so much anymore because the present value of those earnings would be discounted in a rising rate environment.'

Alcoa, the world's largest aluminum producer, fell $1.85 to $34.65 after it failed to meet Wall Street expectations with results released after the market closed Tuesday. The first Dow component to report earnings, Alcoa's profits doubled in the first quarter, but missed analysts' estimate by a penny a share.

Seagate shed 61 cents to $14.98 after the hard disk drive maker dramatically cut its quarterly earnings estimate on weakening demand. A number of brokerage firms lowered its ratings on the news.

Nokia, the world's biggest mobile phone maker, lost 29 cents to $16.92 after investors filed a class action suit Tuesday accusing the company of securities fraud related to its first-quarter forecast. The firm's shares had dropped 19% on Tuesday after issuing a gloomy outlook.

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