The New York stock markets trod water yesterday in light trading, as investors and analysts tried to anticipate whether the pre-Easter recovery would continue in the face of renewed uncertainty about corporate earnings.
The Nasdaq Composite Index showed signs of a slight relapse after its second-best week ever. For the holiday-shortened week - the exchanges were closed on Friday - the Nasdaq gained 241 at 1,961. The Dow Jones industrial average was up 336 points at 10,126, and the Standard & Poor's 500 index rose 55.07 to 1,183.
Yesterday, the Dow closed at 10,158.56, up 31.62, while the Nasdaq fell 51.9, or 2.65 per cent, on 1,909.53. The S&P 500 finished at 1,179.67, down 3.83.
"We're still being held hostage by earnings," said Sam Stovall, S&P's senior investment strategist. "This quarter will be a tough one. We expect a 16 per cent decline in earnings for the S&P 500 and a combined 40-50 per cent decline in earnings for techs, cyclicals and basic materials.
One of Wall Street's most-respected technical analysts predicted yesterday, however, that the worst may be over for the Nasdaq, despite anticipation of poor earnings reports and downward predictions for the rest of this year, and renewed pressure on the computer chip market.
"The market's early April return, which included a 14 per cent advance in the Nasdaq Composite last week, appears to be the start of a spring recovery trend," said Mr Richard McCabe, chief market analyst for Merrill Lynch.
There was also evidence of recovery in the dramatic fall in public offering (IPO) activity. "During the first quarter of the year only 18 IPOs came to market, the lowest quarterly total in 20 years," he said. "This compares with peak quarterly figures in the 140-170 range between the second quarter of 1999 and the third quarter of 2000. Other quarters with low IPO activity, ie 20 or less, were the third quarter of 1982 and the fourth quarter of 1990 and both of these were important market bottoms."
Canadian stocks fell yesterday on concern that a series of earnings reports out this week will show many stock prices still underestimate the impact of slowing economic growth on profits. Those to report include Nortel Networks, Alcan, Celestica, Suncor Energy, PanCanadian Petroleum and Domtar.
On Wall Street Banc of America and Citigroup, the biggest US financial services company, were among several US firms to report gloomy earnings results for the first quarter yesterday. Continental Airlines, the fifth biggest US airline, said its first-quarter earnings sank 36 per cent.
Then yesterday Cisco Systems warned that third quarter sales would come in 30 per cent lower than the second quarter and announced plans to reduce its workforce by 8,500 people to cope with faltering demand for information technology equipment. The world's top provider of networking devices for the Internet cited "global economic challenges, the slowdown in the global telecom market and the decleration in corporate information technology spending".
Other big companies beat earnings forecasts, among them power generator Reliant Energy which defied unpaid debt from crippled California utilities. The Houston-based utility reported adjusted earnings per share of 94 cents or $274 million, up from year-earlier first-quarter earnings of 47 cents per share or $134 million.
Drug maker Eli Lilly, which has extensive operations in Cork, reported a 16 per cent rise in first-quarter profits, in line with Wall Street expectations, on strong sales of schizophrenia treatment Zyprexa and osteoporosis drug Evista.
