Tech stocks trigger slide on Wall Street
If weak financial results from big tech companies are sign of what's to come, stock traders are in for a tough summer.
Stocks fell early Friday as poor earnings reports from technology companies suggested that the weak economy hurt corporate profits in the second quarter.
Micron Technology Inc. fell 13 percent after the company said lower sales of computer chips hurt its earnings, which were far less than analysts had expected. Oracle Corp. fell 4 percent after its sales of computer hardware fell sharply.
Technology stocks were broadly lower. Micron had the biggest loss of any stock in the Standard & Poor's 500 index. Cisco Systems Inc. fell 2 percent, and Microsoft Corp. lost 1 percent. SanDisk Corp. fell more than 4 percent.
Technology companies are seen as an early indicator of other corporate earnings reports because they release financial results a couple of weeks before most other companies.
A series of poor reports on the economy have already weakened investors' expectations for the next round of earnings from big U.S. companies, which will start to come out in early July. The early indications from Micron and Oracle raised the prospect that investors may need to lower the bar even further.
"No one is expecting good news, but if it's worse than expectations, this is really a very shaky market," said Uri Landesman, president of Platinum Partners, a hedge fund.
Landesman expects that the Standard & Poor's 500 index will fall to 1,200 this summer as more companies report second-quarter earnings next month. The last time the S&P 500 crossed that threshold was in December 2010.
The Dow Jones industrial average fell 83 points, or 0.7 percent, to 11,966 in morning trading. The S&P 500 fell 10, or 0.8 percent, to 1,273. The Nasdaq composite fell 21, or 0.8 percent, to 2,666.
Italian stocks fell 1.6 percent after Moody's said it was considering downgrading the credit ratings of that nation's banks.
The poor reports from technology companies followed another weak report on the U.S. economy. The government said the economy grew at a 1.9 percent annual rate in the first quarter, slightly higher than an earlier estimate of 1.8 percent but still very slow for a post-recession recovery. Economists expect little improvement in the second quarter, which ends next week.
The government also reported that orders of long-lasting goods increased by 1.9 percent in May after a sharp decline in April. Businesses ordered more machinery, equipment and airplanes.
The U.S. economy has cooled since late April, pulling the stock market down in six out of the past seven weeks. Recent reports on housing, employment, manufacturing and retail sales all have been weak. The debt crisis in Greece and fears that China's growth is slowing have also pushed markets lower.
The Dow is on track for another week of losses. The S&P 500 is flat for the week, while the Nasdaq is up 1.7 percent since last Friday's close.
Drug company Pfizer Inc. dropped 2 percent after the government rejected its application to sell a new pain drug.
Newell Rubbermaid Inc. rose 2 percent after the company late Thursday named Unilever executive Michael Polk CEO. Polk has been on Newell's board of directors since 2009. Analysts applauded the choice.
