- The Washington Times - Wednesday, September 15, 2004

NEW YORK (AP) — Stocks sagged yesterday after Coca-Cola Co. and several other companies issued gloomy forecasts, and a lower-than-expected reading on industrial production for August threw the nation’s broader economic outlook into question.

Adding pressure to technology shares, the Goldman Sachs Group lowered its ratings on both hardware and software stocks based on its latest survey of corporate officers who oversee high-tech spending.

With corporate forecasts falling short of expectations and a number of signals pointing to more modest capital spending, worries about a slower second half were intensifying, but analysts say it’s too soon to tell what lies ahead.

“We’ve been saying for a while that investors need to be much more selective. … This is a stock-picking kind of market,” said John Caldwell, chief investment strategist for McDonald Financial Group. “It may be that Coke’s problems are just Coke’s problems. On the flip side of that, there are a number of companies out there that are saying relatively good things.”

The Dow Jones Industrial Average slid 86.80, or 0.8 percent, to 10,231.36.

The other gauges were also lower. The Nasdaq Composite Index slumped 18.88, or 1 percent, to 1,896.52. The Standard & Poor’s 500 index lost 7.96, or 0.7 percent, to 1,120.37.

The Federal Reserve reported only a 0.1 percent rise in industrial production in August, surprising to economists who had forecast a 0.5 percent gain. The feeble rise, which follows a robust 0.6 percent advance in July, suggests the economy may still be working through the “soft patch” Federal Reserve Alan Greenspan referred to in remarks before Congress last week.

In addition to disheartening news on both the economic and corporate fronts, light trading ahead of Rosh Hashana, the Jewish New Year, contributed to the downward pressure on stocks. Still, after more than a month of decent gains, analysts said it made sense for equities to take a pause on less-than-encouraging news.

“These pre-announcements, which are abundant and quite negative compared to what we saw in the second quarter, are off-putting, of course. There’s trouble in paradise, so to speak,” said Larry Wachtel, market analyst at Wachovia Securities. “But the major factor is you’ve come a long way and you need a rest.”

Energy costs have also been a persistent worry for investors, and already uncomfortably high oil prices headed skyward this week as Hurricane Ivan menaced rigs, threw tankers off course and significantly cut daily production in the Gulf of Mexico. Prices fell back as the storm took aim at the Alabama and Mississippi coasts late yesterday, and light, sweet crude for October delivery declined 81 cents to settle at $43.58 per barrel.

In an effort to quell anxiety about global crude supplies, the 11-nation Organization of Petroleum Exporting Countries announced it would raise its target oil production by 1 million barrels a day later this year. Many analysts dismissed this as a largely symbolic gesture, however, because the cartel is already pumping beyond the new quota.

Dow component Coca-Cola fell 4 percent, or $1.71, to $41.16, after warning that results for the second half of the year were likely to fall short of expectations because of weaker sales and challenging conditions in key markets.

Celestica Inc. sank 14 percent, or $1.97, to $12.60, after lowering its third-quarter forecast, citing a drop in orders from several top customers, which the manufacturer of electronics components declined to identify.

The Toronto-based company’s largest customers include such tech concerns as Cisco Systems Inc., Lucent Technologies Inc. and International Business Machines Corp., and those stocks posted declines as well.

Cisco fell 79 cents to $19.56, Lucent shed 9 cents to $3.32, and IBM lost 35 cents at $86.37.

Other companies issuing downbeat forecasts included publisher Tribune Co., which lost 10 cents to $40.25, and chip maker Xilinx Inc., which shed $1.54 to $27.50.

There was some bright news; the nation’s leading consumer-electronics retailer, Best Buy Co., gained 4.6 percent, or $2.32, to $52.61, after reporting a nearly 8 percent increase in second-quarter earnings, helped by improved cost controls and margins. The results beat analysts’ estimates by a penny a share.

Declining issues outnumbered advancers by 3 to 2 on the New York Stock Exchange. Preliminary consolidated volume came to 1.6 billion shares, up slightly from 1.54 billion shares in the previous session.

The Russell 2000 index, which tracks smaller-company stocks, was down 2.44, or 0.4 percent, at 568.52.

Overseas, Japan’s Nikkei stock average finished 1.2 percent lower yesterday. In Europe, France’s CAC-40 shed 0.4 percent for the session, Britain’s FTSE 100 closed up 0.1 percent and Germany’s DAX index lost 0.15 percent.

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