Morgan Stanley sounded the alarm, arguing that the market wasn't alive to the impact of what it called "unprecedented economic headwinds". Forecasting a 7 per cent decline in under-lying revenues for this year and another 4.8 per cent fall for 2010, the broker said that, although well placed in the long term, estimates had to be balanced against the near-term risk to earnings.
The analyst Edward Hill-Wood added that profitability and leverage may also "undershoot expectations as costs prove surprisingly inflexible and working capital outflows dilute cash flow." He said: "We expect an eventual earnings recovery to lag other cyclicals," he said, scaling back his target price for the stock to 310p from 354p.
At the close, WPP was down 4.7 per cent or 19p at 385.5p – the second worst performing blue chip of the session.
Overall, the FTSE 100 was just over 1 per cent or 41.6 points ahead at 3,753.6, banking gains at the end of what for some traders has been a surprisingly good week. Reversing a recent trend, the index has risen by more than 6 per cent in the last five sessions, prompting some market watchers, who had been looking nervously towards the 3,000-point mark, to target 4,000 as the next big milestone.
Some remained wary, however, with David Jones, chief market strategist at IG Index, saying that "there is still something of an air of twitchiness about the current bounce back". Further afield, the FTSE 250 was 100.7 points stronger at 6,162.5.
The heavily weighted mining sector drew steam from reports that the Chinese authorities were prepared to ramp up public spending if the global economic downturn proves worse than previously thought. The news reignited hopes of a possible uptick in the demand for commodities, which contributed to a more than 10 per cent or 33.7p gain to 360p for Xstrata.
In the banking sector, Barclays, up 3 per cent or 2.2p at 74.1p, rallied on hopes of a possible deal regarding its participation in the Government's asset protection scheme.
Cigarette makers British American Tobacco, down 32p at 1,658p, and Imperial Tobacco, down 25p at 1,629p, were weak after Morgan Stanley lowered its target price for the both stocks to 2,100p on account of the deterioration in market sentiment. The broker remains positive on both, saying that, in its view, the tobacco sector remained "a good home for money," with "virtually zero risk of a dividend cut".
Inmarsat, the satellite group which impressed the market with its results in the previous session, fell prey to a round of profit-taking, losing 7.25p to 451.75p despite words of support from Goldman Sachs, which reiterated its "buy" recommendation.
"The stock has de-rated materially on an absolute and relative basis, and we see scope for this to reverse in light of robust, cash-generative growth," the broker said, raising its target for the stock to 721p from 711p.
Thomson Reuters held firm, edging up by a slight 3p to 1,493p. JP Morgan raised its target for the stock to 1,950p from 1,750p yesterday, telling clients that, although the company continued to outperform its peers, it was minded to wait for a "better entry point" in light of the potential risk-reward profile. "Given potential pressure in some parts of the Markets division," the broker said, "we do not think the risk reward is sufficiently favourable at present."
Land Securities rebounded to 370.5p, up 8.6 per cent or 29.5p, with traders citing a short squeeze. The nil-paid rights issue shares also recorded strong gains.
UBS, which reiterated its "buy" stance, helped to lift sentiment around the commercial property group, saying: "Our numbers now assume a relatively passive business model focused on cash conservation, yet we believe the dividend and earnings are still attractive.
"The dividend yield of the current share price is 8.4 per cent. Longer term, the group should be well placed to exploit opportunities such as accretive acquisitions or its West End developments."
Elsewhere, UBS was less positive on William Hill, which eased by 2.75p to 227.25p. Switching its stance on the bookmaker's stock to "sell" from "neutral", the broker said it was becoming increasingly cautious on the sector, which in its view was "entering a period of heightened regulatory risk to machine income".
UBS said: "Whilst our estimates already incorporate a 3 per cent increase in amusement machine licence duty in the April Budget, a larger rise cannot be ruled out.
"A bigger risk is a negative outcome to the Gambling Commission's review of the impact of high-stake high-prize gaming machines on problem gambling, due by the end of June."
ITV was 5 per cent or 1p behind at 19p after Credit Suisse trimmed its target for the stock to 25p from 34p, saying that while it saw a positive future for the broadcaster in the longer term, at present "the economic, advertising, structural and financing risks" weigh against the investment case.
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