Dow stocks Friday were dragged lower by Honeywell International (HON) after it warned that the profit outlook for this year and next would be disappointing. But better than expected earnings news from software maker Adobe Systems (ADBE) aided technology issues.
The Dow Jones industrial average lost 66.72 points, or 0.80%, to 8,312.69. The Nasdaq composite index tacked on 11.67 points, or 0.91%, to 1,291.35. And the broader Standard & Poor's 500-stock index edged up 2.85 points, or 0.32%, to 889.75.
Some weakness carried over from Thursday's ugly session, in which the major indexes sold off after President Bush's forceful address to the U.N. on Iraq, Federal Reserve Chairman Greenspan's less-than-upbeat testimony on the economy to Congress, and bad jobless claims data.
Some brand-name corporations issued negative earnings guidance. Dow component Honeywell lowered its profit expectations for the current quarter and year and 2003. The stock lost 17% and sparked selling in cyclical stocks like Alcoa (AA). "We are revising our 2002 outlook because it is clear that the broad economic recovery is not materializing," said Honeywell chairman and CEO David Cote. The company is being hit by continued weakness in its commercial aviation division.
Many retailers will be reporting results next week. Among them: electronic retailers Best Buy (BBY) and Circuit City (CC), Pier 1 Imports and supermarket chain Kroger (KR). Software maker Oracle (ORCL) will release fiscal first quarter 2003 results after the market close Tuesday. Food maker General Mills (GIS) will unveil fiscal first quarter results Wednesday. FedEx Corp. (FDX) will issue a profit report Thursday.
Investors will also face a barrage of economic news. On Monday, market players will analyze data on business inventories, a key gauge of how companies are managing their stocks amid lower demand. Economic-research outfit MMS International expects inventories to rise 0.1% in July after a 0.3% increase in June. A 0.4% rise in nondurable stocks is anticipated to drive total inventories higher. Durable inventories are pegged to fall 0.2%. Overall, a modest increase in inventories in July would leave MMS' third-quarter GDP estimate at 3.5%, though such a growth rate requires an inventory drop in August and September.
Over the rest of the week, reports on industrial production and capacity utilization, the consumer price index, housing starts, the U.S. budget deficit and the Philadelphia Fed index will be unveiled.
On Friday, troubled telecom equipment concern Lucent Technologies (LU) said quarterly revenue would be much lower than Wall Street analysts forecasted and losses would be deeper amid ongoing decline in spending by telephone companies. Trading in Lucent shares comprised some 12% of New York Stock Exchange volume.
On the tech front, Adobe Systems helped lead the Nasdaq higher. The company announced a better-than-expected profits for its fiscal third-quarter as investment losses narrowed and also predicted growth in the current quarter.
In a spot of bright news, the consumer continued to bolster the economy in August. Retail sales for the month showed an increase of 0.8%, much better than the 0.4% rise forecasted by economists, and up from the 0.8% dip in July. Excluding auto sales, the increase on the month was 0.4%. The data on autos surprised even some of the most optimistic forecasts, climbing 1.9%, while furniture gained 1.7% and sporting goods jumped 2.9%. Gains suggested "nesting" continues to dominated purchases, says MMS International.
But another report painted a different picture of consumers' mood. A preliminary September reading for the University of Michigan's consumer sentiment came in at 86.2, down from August's final reading of 87.6 and lower than the 88.0 projected by economists.
U.S. Treasuries finished higher in price Friday as continued jitters about terrorism and the prospect of war with Iraq spurred investors to seek the relative safety of bonds. A terrorism hoax in Florida and chemical explosion in Texas kept the safety premium high into the weekend, says MMS International. President Bush gave the U.N. "days or weeks" to take action on Iraq and Baghdad rejected any unconditional return of weapons inspectors.
European stocks finished lower Friday on the heels of Bush's U.N. address and Greenspan's testimony to Congress. London's Financial Times Stock exchange index fell 76.90 points, or 1.88%, to 4,008.00. Germany's DAX index shed 60.59 points, or 1.77%, to 3,361.28. France's CAC index lost 85.67 points, or 2.64%, to 3,156.17.
Geopolitical and economic worries dragged down Asian stocks as well. Tokyo's benchmark Nikkei 225 index lost 173.30 points, or 1.84%, to 9,241.93. In Hong Kong, the Hang Seng Index tumbled 245.36 points, or 2.48%, to 9,650.97.