(REUTERS) U.S. stocks tumble, led by sell-off in semiconductors
(Updates to close)
By Eric Wahlgren
NEW YORK, May 23 (Reuters) - U.S. stocks tumbled on Tuesday
with the technology-packed Nasdaq market closing at its lowest
level so far this year as news of a pause in the
record-breaking pace of orders for computer chip equipment
sparked a fierce sell-off in that sector.
"I think people are just looking for any excuse to sell
technology stocks," said Arnie Owen, managing director of
capital markets at Roth Capital Partners. "The underlying
fundamentals of technology are still strong. But it's any
excuse to sell."
Driving the tech sell-a-thon was word that North American
semiconductor equipment makers posted $142 in orders for every
$100 of products shipped in April, compared with an upwardly
revised ratio in March of $146 orders on average for every $100
in shipments.
But some analysts said the let-up in orders was not
significant as previous months represented phenomenal growth,
but they added that any negative news these days was a reason
for traders to hit the sell button.
Technology weakness shoved the Nasdaq composite index
<.IXIC> down 199.66 points, or 5.93 percent, to 3,164.55, with
the semiconductor sector the biggest culprit.
The Nasdaq's close is the lowest since it finished at 3,156
on Nov. 10, 1999. The index is now off 22.2 percent for the
year.
The Philadelphia Stock Exchange's semiconductor index
<.SOXX> was down 7.74 percent. Intel Corp. <INTC.O>, the
world's No. 1 maker of computer chips, lost 8-1/2 to 109-7/8.
PMC-Sierra Inc. <PMCS.O>, a communications chip maker,
surrendered 22-1/16 to 133-7/16.
The technology downdraft also dragged down the Dow Jones
industrial average <.DJI>, which gave up 120.28 points, or 1.14
percent, to 10,422.27. The 30-stock index is now off 9.35
percent for the year and technically in a "correction" mode as
it has fallen more than 10 percent from its Jan. 14 high of
11,722.98.
After Intel, which is a Dow component listed on the Nasdaq,
big losers in the Dow included automaker General Motors Corp.
<GM.N>, off 2-7/16 at 74-15/16, and computer maker
Hewlett-Packard Co. <HWP.N>, down 2-1/16 to 120-11/16.
International Paper <IP.N> fell 1-5/16 to 36-7/8 on an
analyst's downgrade of the stock and the entire forest products
sector. Bowater Inc. <BOW.N> fell 1-7/16 to 54-3/4 and
Georgia-Pacific <GP.N> lost 3-9/16 at 34-1/8.
Broader measures of the market ended lower too, with the
Standard & Poor's 500 index <.SPX> down 26.86 points, or 1.92
percent, to 1,373.86 and the Wilshire 5000 index <.TMW> was
off 282.66 points, or 2.19 percent, at 12,610.68.
It was the Nasdaq's fifth down session in a row as concerns
about valuations persist amid the prospects the Federal Reserve
would continue to raise interest rates.
"No one wants to commit to technology because every time
they do they are getting their fingers blown off," said Guy
Truicko, portfolio manager at Unity Management in Garden City,
N.Y. "Until we get some kind of feeling that Fed Chairman Alan
Greenspan is done raising rates, there is not much of a
catalyst to drive us north right now."
Technology stocks are seen as more immune to higher
interest rates than old-line companies, but aggressive
increases in borrowing costs by the Fed have raised concerns
about high stock prices relative to earnings. Interest-rate
increases can squeeze profits by making it more expensive for
companies to borrow money.
The central bank raised borrowing costs by an aggressive 50
basis points a week ago and warned it would continue tightening
its monetary policy until it is satisfied that inflationary
pressures are under control.
"I don't have a good idea about where we're going to come
out of this thing until we start to get some economic data that
gives us a handle on what the Fed's course of action" will be,
said Bill Meehan, chief market analyst at Cantor Fitzgerald.
"It's both worries about the inflation scenario and also
concerns about what is a reasonable valuation for some of these
large-cap tech stocks" that is hurting the market, he said.
Volume was moderate, in line with recent trends, with only
867 million shares changing hands. There were 29 stocks hitting
new highs and 88 hitting new lows. On Nasdaq, 1.33 million
shares were traded.
Bond prices rose on the weakness of stocks. The 10-year
U.S. Treasury note gained 3/32, pushing the yield down to 6.44
percent from Monday's close of 6.45 percent. The 30-year bond
rose 9/32, with the yield easing to 6.17 percent from Monday's
close of 6.19 percent.
In other news, manufacturing conglomerate Tyco
International Ltd. <TYC.N>, the most actively traded stock on
the NYSE, dropped 4 to 42-5/16 after Global Crossing
Ltd.<GBLX.O> said its South American Crossing Ltd. unit filed a
$1 billion lawsuit against a Tyco unit for breach of contract
relating to the installation of a fiber-optic cable system.
Global Crossing shares fell 4-25/64 to 23-5/8.
Drug giants Merck & Co. <MRK.N> and Schering-Plough Corp.
<SGP.N> gained after saying they would jointly develop new
medicines in the cholesterol-management and respiratory
therapeutic areas.
Merck rose 1-1/2 to 73-13/16 and Schering advanced 1-11/16
to 45-1/2.
((Wall Street Desk, 212 859 1700))
REUTERS
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