In a grim first week of trading following the deadly terrorist attack on Wall Street’s doorstep, media stocks were hard hit in the market carnage.
Volume soared as stocks changed hands in rapid-fire action.
Viacom and Disney, flattened during the week, rallied Friday as rumors abounded that the Mouse had become vulnerable to a hostile takeover. Its stock fell to a six-year low earlier in the week.
Companies large and small issued earnings warnings, including broadcaster and publisher E.W. Scripps, Hearst Argyle and Gannett.
Standard & Poor’s issued a negative warning on all media and entertainment companies, saying that already weak advertising prospects would be compounded by the World Trade Center tragedy.
Media analysts, back at work after days of chaos, spewed out dire predictions of a 20%-30% dip in showbiz stocks.
The Dow Jones Industrial Average plunged 14.2% for the week, erasing $1.4 trillion in investor wealth, as market players opted to buy American flags instead of stocks.
The Dow dipped 146 points on Friday, down 1.7%, but ended off its lows for the session, even wading briefly into positive territory amid roars of approval from the stock exchange floor. The short-lived uptick came after NBC parent GE promised double-digit earnings growth this year and the government confirmed a $15 billion-plus bailout package for airlines.
Disney rose 4.2% for the day but was off 25% for the week, closing at $17.70. It hustled to avert an even bigger slump as shareholder Sid Bass unloaded 135 million shares he’d used as collateral for other investments. Disney bought 50 million of them — making sure an angry market wasn’t flooded with Disney stock.
Viacom fell 18% for the week after rising 4% Friday to close at $31.02. Half of the company’s revenue comes from advertising, more than at other big congloms. Viacom topper Mel Karmazin publicly lowered his earnings guidance last week, predicting that operating cash flow this year will barely beat 2000. Earlier, he’d predicted a 13% increase.
AOL Time Warner fell 15% for the week to $29.11. Investors like the conglom’s diverse exposure to cable and the Internet as well as showbiz, but expect it to have lower numbers too.
MGM dipped 17% for the week to $16.74, although it has no broadcast net to fret over and hasn’t had to juggle any movie releases or disrupt its film production sked. Some wonder how committed MGM’s Kirk Kerkorian is to hanging on to the studio in the current climate.
News Corp. plunged 24% for the week to close at $23.29. Vivendi fell 10% to $44.50.
USA Networks fell 20% to $23.07. It said quarterly profits will disappoint as sales flopped at Home Shopping Network.