New York, Thursday - Stocks were bloodied as Hewlett-Packard and United Health Corporation delivered a one-two earnings' warning punch, heightening nervousness as Wall Street heads into the financial reporting season.
The Dow Jones industrial average closed down 83.11 points at 5520.54 after recovering from a loss of nearly 135 points.
The Nasdaq, which is laced with technology stocks, sank 34.83 points (3.05%) to 1106.36. It was the index's third-biggest point loss ever after a drop of 35.70 points on July 19, 1995, and the largest drop of 46.12 points set on October 19, 1987.
Wall Street was shaken by a new batch of warnings by companies about their earnings for the latest quarter.
Hewlett-Packard said its profits would be hurt by a slowdown in orders, while United Healthcare, the nation's largest health maintenance organisation, warned its profits would fall short of Wall Street's expectations.
The warnings heightened investors' anxiety about the approaching financial reporting season. ``The real question is future earnings in the face of higher interest rates,'' said Allen Sinai, Lehman Bros Global Economic Advisers' chief economist.
The earnings announcement by Hewlett, one of the world's most diverse and far-flung computing companies, came one day after another hi-tech giant, Motorola, jolted investors with a greater-than-expected 32% drop in second-quarter profits.
While Motorola is similarly beloved by investors, it, unlike Hewlett, has often disappointed in the past several quarters. ``Hewlett really stunned me,'' said Thom Brown, managing director at Rutherford Brown & Catherwood.
Looking ahead, Mr Sinai believes that stocks will remain under pressure. ``Let's face it. It's finally the big 5% to 10% correction driven by the high likelihood the Federal Reserve will raise interest rates,'' he said. ``Until we can see when and how much we're in a correction mode.''
Mr Brown countered that many stocks have returned to attractive levels. ``Nasdaq was the one that saw the most excesses to the upside, so we would see the worst damage to the downside. I'd be reluctant to sneak back heavily.''
n Detroit - Ford today announced that it will expand its car rental empire by acquiring full ownership of money-losing Budget Rent a Car.
Ford vice-president of finance, David McCammon said the automaker, which also owns industry leader Hertz, in part wants to protect its seven-year-old investment of ``several hundred million dollars'' in Budget. The Lisle, Illinois-based company is a major buyer of Ford cars and trucks.
Ford plans to purchase Budget's common shares in a cash transaction that ``will not be a material amount,'' a Ford spokesman said. Before the deal can be completed, it must receive antitrust clearance by the Federal Trade Commission and the US Justice Department.
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