Stocks Appear Set to Fall; Sun Weighs

By Elizabeth Lazarowitz

NEW YORK (Reuters) - Stocks are expected to tick lower at Thursday's open, buffeted by a fresh barrage of gloomy forecasts from the likes of network computer maker Sun Microsystems Inc. (Nasdaq:SUNW - news).

Sun said it stands to lose money this quarter as its Japanese and European sales fail to meet expectations amid sluggish economic growth.

The high-tech heavyweight's downbeat outlook, as well as a bleak outlook for the optical fiber and cable sector from industry giant Corning Inc. (NYSE:GLW - news), heightened investors' worries about when corporate profits will recover.

``There's a lot of disappointing news out there,'' said James Volk, co-director of institutional trading at D.A. Davidson & Co., adding that a technical bounce is possible after the market's sharp slide this week.

``The key at this point is when do we get a turnaround and as the perception of that gets extended into next year, that's what's hurting the market,'' Volk added.

The European Central Bank delivered a dose of medicine for the ailing stock market after it lowered a key interest rate by a quarter of a percentage point, as expected, in an effort to stimulate economic growth.

Standard & Poor's 500 September stock futures were down 0.10 of a point at 1,152.50, and Nasdaq 100 September futures were down 16.50 points at 1,493, pointing to a weaker start for the tech-heavy Nasdaq market.

The overall weakness of the market could push the closely watched Dow Jones industrial average below the psychologically important 10,000 mark.

Wall Street will be tuned in for data on personal income and spending due at 8:30 a.m. EDT (1230 GMT) for more clues to how the consumer is holding up in the slackening economy.

On Wednesday, stocks fell to their lowest levels in close to five months after the government reported the economy grew at an anemic 0.2 percent pace in the second quarter. Investors' worries resurfaced even though the figure beat expectations for a drop to zero growth from a blockbuster 5.7 percent pace in the second quarter of last year.

Traders were already on the defensive following a report earlier in the week that showed a sharp drop in consumer confidence, heightening fears American consumers might reel in spending -- the linchpin of U.S. economic growth.

Corning, the world's top fiber-optic cable maker, said it would cut 1,000 jobs from its fiber unit, and plans short-term shutdowns at two North Carolina facilities in response to slack demand for optical fiber and cable.

It also said it expects overall market growth for optical fiber in 2001 to be significantly less than the previous 15 percent outlook.

Sun said its weakness was concentrated in Europe and Asia, but that demand was ``a touch behind'' forecasts in the United States and said it had seen U.S. sales falling in the September-ending first quarter from the fourth.

Software giant Microsoft Corp (Nasdaq:MSFT - news) was under the microscope again after the European Commission (news - web sites) said it has expanded its investigation to look into whether the U.S. software giant is illegally tying its Media Player to its Windows operating system.

More bad news came from the world's top personal computer maker, Dell Computer Corp. (Nasdaq:DELL - news), after a senior executive said the company expects technology spending cutbacks in the Asia-Pacific region to continue and remains cautious on PC demand in months ahead.

Altera Corp. (Nasdaq:ALTR - news), which makes microchips that can be programmed by customers for a variety of purposes, said it expects third-quarter revenues to decline by 15 percent to 20 percent, consistent with expectations given in July.

Stocks fell on Wednesday, with key market gauges hitting their lowest closes since April, as investors worried about weak corporate profits amid news the economy showed weak, yet better-than-expected growth.

The blue-chip Dow Jones industrial average slumped 131.13 points, or 1.28 percent, to 10,090.90, its lowest close since April 11. The broader Standard & Poor's 500 Index fell 12.95 points, or 1.11 percent, to close at 1,148.56, a level unseen since April 9.

The technology-laced Nasdaq Composite Index shed 21.81 points, or 1.17 percent, to 1,843.17. Sun, the second-most active issue on Nasdaq, lost 13 cents to $13.43.

In overseas markets, Tokyo stocks dropped for a third straight day to their lowest levels in 17 years, hit by nagging fears about high-tech earnings and disappointment over a slow solution to the problem of bad loans at Japan's banks.

The benchmark Nikkei average (^N225 - news) fell 0.38 percent to 10,938.45, it's lowest close since October 19, 1984.

European stocks were dragged lower by the tech sector, yo-yoing after the ECB trimmed rates and indicated it might reduce them again this year in response to slowing inflation and weakening growth.

The pan-European FTSE 300 index (^FTEU3 - news) was down 0.34 percent.

-- Anonymous, August 30, 2001