The tech-heavy Nasdaq Composite and TSE 300 were down sharply, led by bellwether names. The Dow Jones Industrial came off earlier lows as investors took to defensive and cyclical names to help offset losses amid technology names.
In his semiannual report to the U.S. Congress, Greenspan cautioned that the economy still hasn't emerged from its yearlong slump and could get worse. It was in his estimation that the central bank will do whatever it takes in order to hold off a recession. Market participants were put off assuming the economy is weaker than originally thought. The Fed has slashed interest rates six times this year, totaling 2.75 percentage points, the most aggressive credit-easing campaign in nearly two decades.
Wednesday was another day of earnings reports and announcements that pushed and pulled the market.
Among the financials, American Express fell after it said it expects earnings to fall 76 per cent in the second quarter, due largely to a US$537 million charge it'll record to write down the value of high-yield bonds held by its American Express Financial Advisors unit. The company also said it will cut up to 5,000 additional jobs.
Ford Motor Co. was down as a result of its steep loss in the second quarter, saying it was hurt by costs to replace millions of Firestone tires. The world's No.2 auto maker posted a loss of US$752 million, or 41 cents a diluted share, compared with a loss of US$577 million, or 47 cents a share, in the year-earlier quarter. General Motors also ended the day in the red.
In techland, AOL-Time Warner dragged down the Internet sector after posting a narrower second-quarter loss, amid a rise in subscription revenue at its online and cable-television offerings.
The Internet and entertainment company posted a net loss of US$734 million, or 17 cents a diluted share, compared to a net loss of US$924 million, or 22 cents a share on a pro-forma basis, the previous year. While earnings beat analysts' expectations, revenue fell short of forecasts. Revenue climbed three per cent to US$9.2 billion, from US$8.9 billion on a pro-forma basis a year earlier.
Apple Computer pulled down PC makers even after posting a net income of US$61 million, or 17 cents a share, compared with net income of US$200 million, or 55 cents a share, in the year-earlier period. The numbers modestly beat analysts' expectations.
On Toronto, Celestica shares fell even after meeting reduced second-quarter revenue and earnings targets. Revenue for its latest quarter was US$2.66 billion, up 27 per cent from $2.092 billion in the second quarter of 2000. The year-over- year increase was driven by growth in multiple end-markets including servers, communications and storage. Shares of Nortel Networks and Research in Motion were also ended in the red.
Among the resource cyclicals, Falconbridge made gains after reporting its second-quarter profit fell more than half due to lower metal prices. The nickel producer reported consolidated earnings of US$55.8 million, or 30 cents a share, compared with US$126.3 million or 70 cents, in the same period a year earlier. Fellow mining concerns Inco and Alcan, which put in a technical bounce, also had a good day.
Dhaliwal is President and chief market strategist of Kirn Dhaliwal Associates. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Dhaliwal nor Kirn Dhaliwal Associates held positions in any securities mentioned in this column, although holdings can change at any time. While Dhaliwal cannot provide investment advice or recommendations, he invites your feedback.
