Tuesday July 20, 6:43 PM,- U.S. stocks end down sharply on techs
NEW YORK , July 20 (Reuters) - Stocks were hammered on Tuesday as the market was caught in the crossfire of a selloff in the technology sector.
The Dow Jones industrial average ended down 191.55 points, or 1.71 percent, at 10,996.13, with pressure coming from big losses in two technology components -- International Business Machines Corp.(NYSE:IBM - news) and Hewlett-Packard Co.(NYSE:HWP - news)
It was the Dow's fifth-biggest point drop this year.
...volume of 752 million shares on the New York Stock Exchange.
The Nasdaq plunged 98.11 points, or 3.47 percent, to 2,732.18.
IBM sank 6-5/16 to 128-7/16, a day after its cautious comments(????) about future results offset its better-than-expected earnings.
Brokerage houses raised their earnings estimates on IBM but the firms also warned that the stock could be ripe for a pause in the coming months after surging in the first half of the year.
Hewlett-Packard fell 5-3/4 to 110-1/2.
The software giant Microsoft Corp.,(Nasdaq:MSFT - news) meanwhile, was off 5-1/16 at 93-5/16 after its earnings beat Wall Street's expectations but it warned of slower growth ahead.
''I think managers would rather err on the side of caution,'' said Larry Rice, chief investment officer at Josephthal & Co., of the mood on Wall Street. ''You have so many factors weighing on the economy going forward.''
Investors will turn their attention on Thursday to Federal Reserve Chairman Alan Greenspan's Humphrey-Hawkins testimony before Congress for any clues on future interest-rate increases.
But last week's economic numbers, which showed there was no threat of inflation, have all but vaporized fears of more interest-rate hikes by the Fed in the near future.
Wall Streeters doubted whether companies can keep delivering the expectation-topping earnings that have pushed major stock indexes to record levels as recently as last Friday.
A troubling market indicator for some analysts was the wide margin that declining stocks outpaced advances on the NYSE.
''The last two weeks have seen a loss of momentum,'' said Ralph Bloch, chief technical analyst at Raymond James & Associates. ''You have this massive disparity between the advance/decline index and the Dow. It is an extreme warning time.''
But other analysts noted that despite the market's sharp drop, they did not yet see signs that a major break was imminent, pointing to the subdued trading activity.
Telecommunications company Lucent Technologies Inc.(NYSE:LU - news) dropped 6-3/16 to 69-15/16 after an analyst, who said he talked to the company, said profits in the quarter ending in December may fall short of expectations.(???????)........ Sales to U.S. corporations, though, lagged some forecasts, leading one analyst to predict it will be tougher for Lucent to match its recent sales growth in coming quarters.
Tellabs Inc. (TLAB) fell 5 3/16, or 7.4 percent, to 64 9/16.
The phone-equipment maker was cut to ''buy'' from ''strong buy''
at Lawrence M. Harris at Josephthal & Co., largely on concerns
about the company's MartisDXX system, which had lower second-
quarter sales than analysts and the company expected. The company
also was cut to ''neutral'' from ''buy'' by Timothy Savageaux at
Volpe, Brown Whelan & Co.
Texas Instruments fell 9 to 141. The biggest maker of semiconductors for cellular phones said its second-quarter earnings more than doubled, fueled by soaring demand for its specialized chips. Profit from operations rose 92 cents a share from 35 cents a year earlier, beating the 86 cent First Call average estimate.
Qualcomm Inc. (QCOM) rose 4 1/4(!!!!!), or 2.7 percent, to
162 15/16. The developer of the world's second-most popular cell-
phone technology said third-quarter earnings from continuing
operations rose to 86 cents a share. Profit was 75 cents when
including a cell-network equipment division it sold to Ericsson
AB. (ERICY). That beat the 63-cent average estimate of analysts
surveyed by First Call.
SBC Communications Inc. (SBC) rose 1 1/16, or 1.9 percent,
to 58 1/8. The No. 2 U.S. local telephone company reported net
income of 59 cents a share. The company was expected to earn
58 cents, the average estimate of analysts surveyed by First
Call.
Yahoo! Inc. (YHOO) fell 7 3/8, or 4.9 percent, to 142 1/8.
The top Internet search service said it will take a third-quarter
charge of $22 million for its $5.05 billion acquisition of
broadcast.com inc.
General Motors Corp. (NYSE:GM - news) was down 1-13/16 at 66-1/2. The world's biggest automaker's earnings beat expectations but analysts said the company indicated its outlook for the second half of the year was mixed.
Health care giant Johnson & Johnson (NYSE:JNJ - news) edged up 1/2 to 96-7/16 after its earnings surpassed Wall Street's expectations.
Genentech Inc.(NYSE:DNA - news) jumped 30 to 127 after its parent company, Roche Holding spun off 15.7 percent of the biotechnology company in an initial public offering.
Engage Technologies Inc. (ENGA) rose 26, or 173 percent, to
41. The Internet marketing company controlled by Web venture
company CMGI Inc. (CMGI) yesterday sold 6 million shares at $15
each, raising $90 million.
Healtheon Corp. (HLTH) rose 4 1/16, or 6.9 percent, to
63 1/8. The company, which links doctors, insurers and patients
through the Internet, said it will provide online drug-
prescription services to customers of Merck & Co.'s (MRK)
pharmacy benefit unit.
Immunex Corp. (IMNX) fell 11 9/16, or 10 percent, to
109 1/2. The biotechnology company fell after second-quarter
sales of its Enbrel rheumatoid-arthritis drug didn't beat
analysts' forecasts as it did in the first quarter.
PRI Automation Inc. (PRIA) fell 6 1/4, or 16 percent, to
31 7/8. The biggest maker of automation equipment for
semiconductor plants fell on concern that lower prices charged to
customers in Asia will result in a wider-than-expected loss this
quarter.
The Standard & Poor's composite index of 500 stocks fell 30.55 points to 1,377.10. The American Stock Exchange index fell 11.76 to 805.90.
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Technology News,,,,Tue, 20 Jul 1999, 11:32pm EDT
Lucent, Microsoft, IBM, Other Tech Stocks Tumble on Concern About 2nd Half
By Anthony Effinger
Lucent, Microsoft, IBM Tumble on Concern for 2nd Half (Update2)
(Updates with closing stock prices.)
San Francisco, July 20 (Bloomberg) -- Lucent Technologies
Inc., Microsoft Corp. and other technology stocks fell amid
concern that sales and earnings won't increase enough in the
second half to justify this year's rally in their shares.
Lucent, the No. 1 maker of telephone equipment, fell 6 41/64
to 70 3/16. Microsoft, the most active U.S. stock, fell 5 1/16 to
93 5/16. International Business Machines Corp. dropped 6 1/4 to
128 3/8, and Sun Microsystems Inc. fell 3 13/16 to 70.
The Nasdaq Composite Index, which includes many high-tech
firms, fell 98.11, or 3.5 percent, to 2732.18. Before today, it
had risen almost 30 percent in 1999.
Investor enthusiasm for technology waned today after several
bellwether companies reported earnings that included indications
of slower growth. Lucent, for one, said sales to corporate
customers rose 4 percent, compared with overall revenue growth of
22 percent. IBM said sales of server computers rose just 3.3
percent, falling short of some expectations.
''There was a tremendous run-up of (technology) stocks in
anticipation of good results,'' said Bill Milton, an analyst at
Brown Brothers Harriman & Co. ''It's going to be really hard'' to
keep up the pace in the second half, he said.
Lucent's profit from operations for the quarter ended June
30 climbed 60 percent to $829 million, or 26 cents a share, from
$518 million, or 17 cents, a year earlier. That beat the 23-cent
average estimate from First Call Corp. and matched the highest
forecasts published on Internet sites.
Still, concern about corporate sales slammed the stock,
which had increased about 40 percent this year before today.
''The company has been stretching to make an aggressive
growth target,'' said analyst Steven Levy at Lehman Brothers
Inc., who rates Lucent ''neutral.'' Levy said Lucent's sales
missed his forecasts by about $200 million.
Tougher Comparisons
Investors found fault with IBM even though profit from
operations rose 17 percent to $1.69 billion, or 91 cents a share,
from $1.45 billion, or 75 cents, in the year-earlier period. The
results missed by a penny some unpublished estimates on the
Internet. Wall Street analysts expected earnings of 88 cents,
according to a survey by First Call.
''A lot of stocks had already baked in best-case
scenarios,'' said Randy Yuen, technology analyst at Salomon
Brothers Asset Management Inc. ''There's no room for error.''
In the third and fourth quarters, IBM faces a tougher
comparison to the year-earlier periods, when personal computer
prices stabilized and its sales began to pick up. That could
reduce sales and earnings growth rates this year.
Further, IBM Chief Financial Officer Doug Maine said
yesterday he couldn't predict the impact of the Year 2000
computer glitch on IBM's sales. The Year 2000 glitch causes
computers to read 2000 as 1900.
Microsoft
Microsoft, the world No. 1 software maker, also cited
concern about Y2K issues in its caution that revenue growth will
slow in fiscal 2000, which began July 1.
''We remain cautious about the third and fourth calendar
quarters,'' with respect to the Year 2000 bug, Microsoft Chief
Financial Officer Greg Maffei said yesterday.
Before today's decline, Microsoft shares had risen almost 42
percent for the year. IBM had risen 46 percent.
Some investors said they remain optimistic about technology
in the face of today's decline. Christian Koch, senior analyst at
Fifth Third Bank in Cincinnati, said he likes Hewlett-Packard Co.
and chipmaker Texas Instruments Inc. in particular.
''The general picture is still solid,'' Koch said.
Texas Instruments shares fell 8 15/16 to 141 as the rout in
technology overshadowed strong earnings. Its profit from
operations more than doubled to $372 million, or 92 cents a
share, from $142 million, or 35 cents, in the year-earlier
period. Sales rose 8.3 percent to $2.35 billion.
Before today's losses, Texas Instruments shares had risen
more than 75 percent, boosted by optimism about its digital
signal processors, which are used in mobile phones.
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