Stocks fall on latest spate of bad economic news

By Amy Baldwin Published: June 15, 2001
NEW YORK - Stock prices declined again Friday, suffering from the latest weak economic data and high-profile earnings warnings from Nortel Networks, JDS Uniphase and McDonald's.

A drop in manufacturing activity in May also weighed on the market, squelching investors' hopes that business in general will improve by the end of the year. The Federal Reserve reported that output at U.S. factories, utilities and mines fell 0.8 percent in May, falling for the eighth consecutive month.

"Across industry groups we continue to see warnings. And, that has completely brought into question whether the economy was in the process of bottoming, and whether we are now going to see a turnaround in the second half (of 2001)," said Todd Clark, co-head of trading at WR Hambrecht.

In afternoon trading, the Dow Jones industrial average was off 2.28 at 10,687.85, after dropping 123 points earlier.

The broader market was also lower. The Nasdaq composite index slipped 11.59 to 2,032.48, and the Standard & Poor's 500 index was down 1.41 at 1,218.46.

The expiration of stock futures and options Friday, a quarterly occurrence called triple witching, also contributed to the downturn. Triple witching, even in bull markets, can lead to sharp declines and higher volume, both of which were apparent in Friday's session.

By mid-afternoon, when the indexes had recovered from their lows of the day, analysts said triple witching could have been what was keeping the market down.

Stocks did advance briefly Friday on the notion that the economic picture is so weak right now that the Federal Reserve Board could slash interest rates by another half a percentage point at its meeting June 26-27. The Fed, which has lowered rates five times this year by a total of 2.5 percentage points to spur the economy, had been expected to cut rates by another quarter of a point.

Aside from the prospect of a larger-than-expected rate cut, investors had no reason to buy stocks Friday, especially in the high-tech sector.

Tech stocks suffered from an earnings warning from Nortel that followed a warning late Thursday by JDS Uniphase.

Nortel, a network equipment maker, also announced plans to cut another 10,000 jobs on top of 20,000 cuts announced earlier this year. Nortel slipped $1.20 to $9.40, while JDS Uniphase, which makes fiber optic equipment, fell $1.69 to $12.12 Friday.

Investors also sold off shares of companies that make fiber optic networking equipment. Corning was down $1.30 at $14.70.

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