IT warning impacts on stocks

MAJOR US stocks indexes stayed mired in the red at midday yesterday as investors struggled to come to grips with a staggering warning from Electronic Data Systems that also knocked the wind out of rival IBM.

Around 12.10pm ET, the Dow Jones industrial average lost 103.97 to 8,068.48, pulling back moderately from session lows. The Nasdaq composite index fell 16.14 to 1,235.99, while the Standard & Poor’s 500 index dropped 12.95 to 856.51.

EDS, the IT company warned late Wednesday that third-quarter earnings and revenue won’t measure up to previous expectations by a wide margin. It blamed the shortfall on continued restraint in IT spending by corporations.

“What we’re seeing is that investors have no patience for a company that whips up numbers and lies,” said Marc Cohodes, an analyst at New York hedge fund Rocker Partners. Market breadth was negative. On the New York Stock Exchange, decliners beat advancers 11-to-5 as 642 million shares traded.