3M profit warning hits blue-chips

NEW YORK - US blue-chip stocks fell sharply on Friday (US time) as a profit warning by 3M rattled investors, with a government report showing weaker job growth and rising inflation.

But gains among banking and energy company shares limited a broader sell-off on the S&P, while a drop in the shares of coffee shop chain Starbucks, placed pressure on the Nasdaq.

Diversified manufacturer 3M, an economic bellwether, forecast second-quarter and full-year results to be at or below Wall Street's estimates, tempering optimism about the US corporate earnings outlook.

"The fact that the economy is slowing, is becoming more palpable to investors," said Michael Pento, senior market strategist at Delta Global Advisors, in Sarasota, Florida.

The Dow Jones industrial average was down 108.70 points, or 0.97 per cent, at 11,116.60.

The Standard & Poor's 500 Index was down 3.82 points, or 0.30 per cent, at 1270.26. The Nasdaq Composite Index was down 10.31 points, or 0.48 per cent, at 2144.78.

3M shares registered their biggest one-day percentage slide in more than eight years, falling 8.1 per cent to US$74.80 on the New York Stock Exchange. They were the principal drag on the Dow, accounting for more than 50 points of the Dow's slide.

That overshadowed a 2 per cent gain in the shares of General Motors. The US automaker's board on Friday approved exploratory talks on a three-way alliance with Nissan and Renault.

GM shares were the biggest advancer on the Dow, up 1.8 per cent at US$29.73.

Weighing on the Nasdaq, shares of Starbucks fell 5 per cent to US$36, a day after it said sales at coffee shops open at least 13 months rose 6 per cent in June, at the low end of Wall Street's estimates.

Adding to the negative tone, shares of Advanced Micro Devices fell 2.3 per cent to US$23.27 on the NYSE after the chipmaker slashed its second-quarter sales forecast.

But gains in energy shares such ConocoPhillips, which gained 0.6 per cent to US$68 on the NYSE, helped limit a broader decline on the S&P. Analysts expect the energy sector to still show strong profits, helped by record crude oil prices.

Gains among banking stocks such as Wells Fargo also lent some support to the S&P. Shares of the No 5 US bank edged up 1.3 per cent to $68.36 on the NYSE.

Before the market's opening bell, the US Labour Department said 121,000 non-farm payroll jobs were created in June - far short of economists' expectations of 185,000 jobs, although the reading was above an upwardly revised figure of 92,000 in May. But the report also showed a rise in average hourly earnings, setting off alarms about rising wage inflation.

Analysts said the report suggested the Federal Reserve would have room to stop raising interest rates while others said the report raised worries about the state of the economy.

- REUTERS