Abreast of the market: Jitters over profits could upset stock market
Here they go again.</br></br>In what has become a quarterly ritual of public self-flagellation, companies are taking whacks at their own profit prospects. Known as earnings pre-announcements, these warnings about imminent disappointments tend to roil the stock market in the last few weeks of each quarter.</br></br>The leading edge of the current wave hit last week. Digital Equipment knocked technology stocks for a loop with its pronouncement that weak personal-computer sales are dragging its earnings below what analysts had expected for this quarter. Trucking company Ryder System followed Friday by saying winter storms and the General Motors strike would make its first-quarter results disappointing. Other companies also announced GM-related hits.</br></br>More bad news is sure to follow this week as companies prepare investors for the worst. "There is a strong possibility that a lot of earnings estimates are still too high, not only in terms of technology companies, but the entire cyclical sector of the economy," says Charles Pardillo, chief strategist at Cowen & Co, which joined several other brokerage firms in lowering its investment rating and earnings estimates for Digital last week.</br></br>"These tech stocks are acting as if there may be further problems down the road," Mr. Pardillo says. "When you look at demand, we're seeing some abatement and disappointment. It seems, across the board, many analysts have been over-enthusiastic."