Big stock shock

Media shares hit as market stumbles

Media and entertainment stocks joined the rest of the market in a freefall Tuesday that abruptly halted Wall Street hot streaks for the country’s largest congloms.

Disney sustained the biggest drop among the major companies, falling nearly 6% in Tuesday trading; Time Warner lost more than 4% of its value.

News Corp., CBS, Viacom and Sony all lost between 2% and 4%.

Other big losers in media and entertainment included Comcast, Marvel and XM, which all fell by close to or more than 5%, including after-hours trading.

For Disney, the slide partly undid a remarkable gain of nearly 25% as the company rode a wave of good news over the past six months. Mouse House more than quadrupled its profit and watched studio revenue rise 29% in the most recent quarter thanks to the success of pics including “Pirates of the Caribbean: Dead Man’s Chest.”

Stock closed Tuesday at $33.10, about where it sat in early December.

News Corp. also sustained a hit to its recent good fortune: Stock had climbed about 10% since the start of the year, but lost more than 3% of that Tuesday to close at $23.83.

And, including after-hours trading, Time Warner’s stock lost more than 5% of its value after rising more than 30% in the past six months. As of Tuesday evening, it sat at $20.

Generally, though, the fall of media and entertainment stocks was not spectacularly out of line with the rest of the market. Most companies’ shares were down between 2% and 4% like companies across every sector.

It was a day in which the market took no prisoners. The Dow Jones Index slid by 416 points, or 3.3%, on the worst day of trading since the first day of trading after Sept. 11, 2001. The more broad-based S&P 500 index, which includes nearly every major conglom, fell about 3.5%.

The Dow actually dropped more than 500 points by mid-afternoon before rebounding slightly toward the close of trading.

Like the rest of the market, media companies saw unusually heavy trading volume as investors suddenly found themselves re-evaluating their portfolio. Time Warner, the world’s largest media conglom, saw 40 million shares traded, while Disney saw nearly 15 million shares exchange hands.

Experts were left scrambling in an effort to find a unifying theory for the market’s plummet, with reasons including the frantic selloff in Chinese markets, the latest economic data about U.S. orders of durable goods and even an apparent assassination attempt on Vice President Dick Cheney.

Around Gotham, analysts and conglom spokesmen downplayed the losses, saying things such as “It’s a one-day blip” and “Let’s see what the Asian markets do overnight.”

Indeed, companies like News Corp. and Time Warner showed significant double-digit increases over the past year, with News Corp. well above 40%.

Still, the events were a blow to the media companies that have made fragile but steady gains on Wall Street.

A year ago, execs like Rupert Murdoch and Leslie Moonves were actively campaigning, at investor confabs and in the media, for Wall Street to recognize their strategy and purchase their stock. If the Tuesday selloff augurs more dismal days ahead, it could, in execs’ worst fears, begin dialing back those gains.

With the news coming during earnings season for many of the media congloms, the crash tended to amplify bad news and mitigate good news.

It was not a good day to come off bad earnings news, as Marvel learned: After company announced Monday that its net income dropped from $26 million to $11 million, its stock dropped nearly 6% on Tuesday.

And in the wake of an announcement of rosier earnings at Sirius — where losses narrowed and revenues doubled — the stock dropped just slightly more than 2% on a day when it might otherwise have risen.

For a few companies, though, earnings news didn’t seem to matter on a generally bleak day. CBS reported strong fourth-quarter earnings — a profit of $335 million after a loss of more than $9 billion in the comparable quarter last year. Its stock price still dropped nearly 4%.

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