Bloomberg News
Fri, 23 Jun 2000, 12:21am EDT
U.S. Stocks Tumble; Nasdaq, S&P Have Biggest Losses in a Month
By Nick Olivari
New York, June 22 (Bloomberg) -- U.S. stocks tumbled, led by technology companies, as investors unloaded shares that rallied most in recent days before next week's Federal Reserve meeting. The Nasdaq Composite Index and Standard & Poor's 500 Index had their biggest losses in a month.
Cisco Systems Inc., Intel Corp. and Oracle Corp. drove down the Nasdaq, snapping its five-day, 7 percent winning streak. After technology shares, drug stocks including Pfizer Inc. and Eli Lilly & Co. contributed most to the S&P 500's drop amid concern sales growth may slow.
``Investors bought into the story of no interest-rate increases at this Fed meeting, but now they are not so sure,'' said Rich Barnett, portfolio manager at City National Investments in Beverly Hills, California, which oversees $4 billion. ``The closer we get to the Fed meeting, the worse it will get.'' The CNI Charter Large Cap Growth Fund has gained 9 percent in the last month, compared with a 3.7 percent advance for the S&P 500.
The Nasdaq fell 127.17, or 3.1 percent, to 3936.84. The S&P 500 lost 26.95, or 1.8 percent, to 1452.18. Neither has fallen more since May 23.
The Dow Jones Industrial Average lost 121.62, or 1.2 percent, to 10,376.12, led by Intel and International Business Machines Corp.
Almost two stocks fell for every one that rose on the New York Stock Exchange. Some 1 billion shares changed hands on the Big Board, up 2.7 percent from the three-month daily average.
Burr-Brown Corp. helped limit the losses, rising after the electronic-components maker agreed to be acquired by Texas Instruments Inc.
Recent signs the economy is slowing had boosted investor optimism the central bank was almost finished raising rates after six increases in a year, helping spark the Nasdaq's rally.
`Too Much, Too Soon'
``The rally was too much, too soon, when there are still so many uncertainties about what the Fed will do next week and how earnings will be,'' said Alan Ackerman, a Fahnestock & Co. investment strategist.
Cisco, up 8.6 percent between June 12 and yesterday, lost 2 7/8 to 64 9/16; Oracle, which rose 5.3 percent the first three days of the week, slid 4 11/16 to 81 1/2; and Intel, up 10 percent the past three days, fell 4 15/16 to 134 1/16.
IBM fell 3 to 111 1/2.
Micron Technology Inc. fell 5 15/16 to 84 13/16. The biggest U.S. maker of memory chips is expected to report fiscal third- quarter earnings of 35 cents a share, according to a First Call/Thomson Financial survey of analysts.
Rate concerns were stoked today after the Organization of Petroleum Exporting Countries raised its output by less than some analysts expected, increasing the chance that oil prices will remain high and spark inflation.
The price of crude -- used in everything from gasoline to garbage bags -- has surged more than 35 percent since April 10, and is hovering near a nine-year high.
Fed policy makers meet Wednesday. They have already raised rates six times in the past year to slow the economy and check inflation.
Drug Shares Fall
Pfizer, maker of the impotence drug Viagra, dropped 1 1/8 to 45 3/4, and Lilly, maker of top-selling antidepressant Prozac, fell 2 1/4 to 84 1/2, after Roche Holding AG, Europe's fifth- biggest drugmaker, warned analysts that first-half pharmaceutical sales growth would slow.
That raised concern that other drug and pharmaceutical companies may see slower sales growth, investors said.
WorldCom Inc. fell 1 5/16 to 39. The No. 2 U.S. long-distance carrier may offer to sell Sprint Corp.'s long-distance phone and Internet businesses in a new bid to win antitrust approval for their merger, people familiar with the transaction said. Sprint rose 5/8 to 59 5/8.
Burr-Brown gained 27 3/8 to 100. The electronic-components maker agreed to be bought by Texas Instruments, a maker of semiconductors for cellular phones, for $7.6 billion in stock.
Texas Instruments fell 2 3/8 to 79 5/8.
Lycos Gains
Lycos Inc. rose 5/16 to 54 5/16. Chase H&Q analyst Paul Noglows upgraded the stock to ``strong buy'' from ``buy,'' citing a ``significant trading opportunity'' in Lycos shares.
Noglows said discussions with Lycos management convinced him the planned acquisition of Lycos by Terra Networks SA will occur, despite investor concern about an insider trading investigation of Juan Villalonga, chairman of Telefonica SA, majority owner of Terra.
Red Hat Inc. gained 2 5/16 to 34 3/16 after Intel unveiled its first branded Linux product, a limited-function computer for e- mail and surfing the Internet, in a bid to break into the consumer market for Web appliances.
Red Hat helped develop the free Linux computer operating system.
Rambus Inc. rose 4 1/2 to 97 1/8 after Samsung Electronics Co. said it expects sales of memory chips based on Rambus's designs to surge more than 10-fold in the next two years.
Rambus's chips boost the speed of personal computers and other devices. Samsung is the world's biggest maker of memory chips.
Alteon Websystems Inc. rose 9 3/8 to 91 7/8 after Lehman Brothers Inc. analyst Timothy Luke said revenue will be higher than expected in the current quarter because of increased sales of its Internet switch products.
Bids for Nabisco
Nabisco Holdings Corp. fell 1 11/16 to 51 9/16. Philip Morris Cos. made a higher bid for the leading U.S. cookie and cracker maker than Groupe Danone SA of France and Cadbury Schweppes Plc, the Wall Street Journal reported, citing people familiar with the situation.
Philip Morris, the maker of Marlboro cigarettes and owner of Kraft Foods, submitted a bid of less than $55 a share, the newspaper said. The Danone-Cadbury bid is about $45, people familiar with the situation told Bloomberg News. Philip Morris, Danone and Cadbury declined to comment, and Nabisco couldn't be reached for comment.
Nabisco Group Holdings Inc., parent of Nabisco Holdings Corp., fell 3/16 to 24 3/4, while Philip Morris lost 1 1/16 to 23 15/16.
Goldman Sachs & Co. analyst Romitha Mally downgraded Nabisco Holdings to ``market perform'' from ``recommend'' and Nabisco Group Holdings to ``market outperform'' from ``recommend.'' She said Nabisco Holdings stock is already trading near the price indicated by the bids for the company, while there may be more room for Nabisco Group Holdings shares to rise.
Associates First
Associates First Capital Corp. fell 1 1/2 to 21 3/4. The home- equity lender is likely to be the target of a civil lawsuit filed by the U.S. Justice Department charging the company discriminated against blacks, the Wall Street Journal reported, citing people close to the matter.
Visx Inc. rose 4 3/8 to 32 15/16 after the U.S. Patent and Trademark Office indicated it will allow Visx to amend a patent covering commercial uses of its excimer laser in vision correction surgery.
Yahoo! Inc. fell 11 1/8 to 131 11/16. Merrill Lynch & Co. analyst Henry Blodget said he expects the Web-navigation company to report a ``strong but slightly less robust'' second-quarter profit compared with the first quarter.
Fisher Scientific International Inc. fell 9 9/16 to 28 7/16 after the seller of laboratory equipment from test tubes to microscopes, agreed to pay $840 million to acquire PSS World Medical Inc. Fisher said the acquisition would boost earnings in the first year.
Georgia-Pacific Falls
Georgia-Pacific Group fell 1 3/16 to 26 1/4 after Morgan Stanley Dean Witter & Co. analyst Matthew Berler cut his profit estimates and target price on the paper and cardboard maker.
Berler lowered his earnings forecast for 2000 by 7 percent to $4.80 a share and dropped his 2001 forecast by 9 percent to $6.67, saying weak markets for building materials would lower sales.
The analyst said the stock could rise to 48, though he didn't specify a time period. This is lower than the 58 he'd predicted earlier.
IDX Systems Corp. declined 3 5/8 to 11 1/2. The provider of health-care software expects a second-quarter loss from continuing operations of 30 cents to 35 cents a share, wider than the 12-cent estimate of analysts surveyed by First Call. IDX also said it will cut about 150 jobs, 5 percent of its workforce.
Mercury Interactive Corp. climbed 1 9/16 to 99 7/16. The software-testing products maker will replace Milacron Inc., a plastics-processing equipment maker, in the S&P 500. Milacron will take Mercury Interactive's place in the S&P SmallCap 600 Index.
Visual Networks Inc. advanced 3/4 to 31. The maker of software that measures data networks' efficiency will replace Magellan Health Services Inc., a manager of psychiatric health plans, in the SmallCap 600.
Laser Vision Centers Inc. rose 3/4 to 7 after the provider of vision-correction lasers said it expects profit of 16 cents a share for the fourth quarter ended April 30, 45 percent more than the average of analysts surveyed by First Call.
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