The market closed the first week of the quarter with a sell-off as negative surprises outweighed the good.
U.S. unemployment fell more than expected in June (114,000 jobs were lost, three times the expectated number) to equal the highest unemployment rate in two years at 4.5 percent.
At the same time, two high-tech blue chips warned they had disappointing quarters.
EMC announced that second quarter earnings would come in significantly below expectations. The high-end storage manufacturer said it would earn between 4 and 6 cents a share on revenue of $2 billion; previous estimates were for a profit of 18 cents a share on revenue of $2.5 billion. The company attributed the
shortfall to a global showdown in technology spending. Shares in EMC closed down 28 percent at 21.60.
The shortfall dragged down other players in the server market. Sun Microsystems was off 9.8 percent to close at 13.68 and IBM
shed 5 percent to close at 106.5.
Chip-makers were also hurt after Advanced Micro Devices said competitive pricing pressure would result in a second quarter profit that was down seventeen percent from the first quarter. In April the company had warned that it would be down only ten percent. The company said it acheived record sales levels for its personal computer processors in the quarter; however, profit was squeezed by price cutting at Intel, and by weakened demand for its Flash memory chips. AMD closed down 27.4 percent at 20.80. The Philadelphia Semiconductor Index closed down 8 percent, its biggest single day drop in more than three months.
Internet stocks were weak without any good news to counter the overall market trend. The ISDEX closed at 218.9, down 10.0 percent. Amazon held on to yesterday’s gains to close at 15.27 on volume that was above average (9 million shares compared to recent averages of 7 .1 million shares). In the broader market, volume was weak, down about 13 percent compared to the previous week.
Scient led ISDEX stocks to gain 6.2% closing at 0.85.
The DJIA was off by 2.2 percent to close at 10,252. The NASDAQ closed at 2004, down 3.6 percent.
