Stock Watch - Earnings Warnings Dampen Investor Enthusiasm

Posted: 09/2001

Stock Watch

Earnings Warnings Dampen Investor Enthusiasm

Technology and blue chips enjoyed some gains during the month-long trading period that ended July 16, as investors hoped the economy is showing signs of recovery. However, as we move into the second quarter reporting period, several substantial earnings warnings kept the lid on investor enthusiasm, and Wall Street adopted a wait-and-see attitude.

“People are waiting for new information and will adjust positions depending on that,” says Howard Kornblue, portfolio manager with ING Pilgrim (www.pilgrimfunds.com), which manages nearly $18 billion. “What the companies will comment and forecast going forward will have a major, major influence on stocks.”

During our trading period, the Dow Jones Industrial Average dropped 151.52 points, or 1.43 percent to close at 10,472.12. In contrast, the PHONE+ Stock Index gained 56.83 points, or 2.89 percent to end at 2,025.46. However, declining issues outpaced advancing issues 68 to 40.

Shares of ITXC Corp. (www.itxc.com) rose 1.21 points this session after the Telecommunications Cooperative of Santa Cruz (COTAS,
www.cotas.com), Bolivia’s second largest local exchange carrier, signed a strategic alliance with ITXC, an event that made front-page headlines in Santa Cruz.

Alltel (www.alltel.com) jumped 8.40 points, or 14.89 percent and closed at $64.83. ABN Amro (www.abnamro.com) analyst Kevin Roe initiated coverage of Alltel with a rating of “buy” and a price target of $74.

ABN Amro says the company is its top choice in the large-cap wireless group and cited a strong balance sheet and several capital-raising options. In the second quarter, ABN Amro says it anticipates Alltel’s earnings at 70 cents per share.

Despite annoucing a “multimillion dollar” pact with Verizon Communications (www.verizon.com) on the last day of our trading session, a move that sent its stock ahead substantially, Level 3 (www.level3.
com) ended the month in negative terrain, shedding 3.48 points, or 45.67 percent, and ending at $4.14. Level 3 had reported earlier that it would cut nearly 1,400 jobs, about 24 percent of its work force.