I think those who are not afraid do not understand the true nature of the problem.
:)
stillhidingunderthebed.com
Warnings from Ciena, BellSouth clock U.S. indexes
Thursday February 21, 3:43 pm Eastern Time
By Julie Rannazzisi
NEW YORK (CBS.MW) -- Grim warnings from Ciena and BellSouth scared off tech investors Thursday, pummeling the Dow industrials and Nasdaq in the final hour of trading.
Shares of telecom and fiber-optic companies continued to fluctuate wildly on credit concerns and poor growth prospects for these sectors. See telecom sector story.
Chip stocks joined telecom and networking issues deep in the minus column following a cautious analyst report on Intel. And AOL Time Warner shares got smacked for a second day following a report that fund manager Janus has been shedding its holding in the media giant.
Additionally, companies under the accounting microscope in recent sessions got no relief: Computer Associates and IBM both suffered more steep losses for a fifth straight session.
The Dow Jones Industrial Average declined 105 points, or 1.1 percent, to 9,835. Leading the index lower were shares of Intel, Walt Disney, Honeywell, Microsoft and IBM. Among the gainers were Alcoa, DuPont, Caterpillar and Boeing.
The Nasdaq Composite plunged 51 points, or 2.8 percent, to 1,724 while the Nasdaq 100 Index forfeited 50 points, or 3.6 percent, to 1,357.
Meanwhile, buoyant data lent credence to the belief that an economic recovery is just around the bend.
The December trade deficit narrowed, while January leading economic indicators climbed 0.6 percent, more than the 0.5 percent that had been expected. It was the index's fourth consecutive month of gains.
Bifurcated market
One technical analyst said in the current news vacuum, market direction was being driven by movements of individual stocks.
"The market is in the same whipsaw pattern that it has been for the past two months and it's very difficult to pick out the overall trend by watching the daily action. It's a market of individual stock trends: for some stocks it's still correction time while bullish trends are continuing uninterrupted for others," commented Robert Dickey, technical analyst at RBC Dain Rauscher.
The S&P Investment Policy Group said in its weekly research note that equity premiums continue to rise in the wake of the Enron scandal and the increased scrutiny of accounting methods.
"This will place additional pressure on still-elevated valuations. How will investor trust be restored? Time and increasingly detailed annual reports will help," S&P said.
In the broad market, biotech, financial, retail and utility stocks faded while the broad market enjoyed respectable gains in oil service, oil, natural gas, airline, defense and gold issues.
The Standard & Poor's 500 Index slid 1.1 percent while the Russell 2000 Index of small-capitalization stocks dropped 1.2 percent.
Richard Dickson, technical strategist at Hilliard Lyons, said key to performance over the near term is how the top indexes react around crucial resistance levels. He pegs those levels at 10,050 for the Dow, 1,125 for the S&P and 1,878 for the Nasdaq.
"If the market can close above these levels on heavy volume, a further rally would be possible to around 10,300-400 on the Dow, 1,160 on the S&P and 2,020 on the Nasdaq. But until the mentioned resistance levels are breached, any near-term rally will simply [be viewed as] an interruption in the S&P's and Nasdaq's downtrends and another brief rally within the Dow's trading range," the strategist commented.
Volume totaled 1.11 billion on the NYSE and 1.51 billion on the Nasdaq. Market breadth remained mixed, with winners taking out losers by 16 to 14 on the NYSE and decliners outpacing advancers by 18 to 15 on the Nasdaq.
Telecom, chip and networking sectors hit
Ciena's (NasdaqNM: CIEN - news) 10.3-percent drop pulled the fiber-optic and networking group sharply lower after issuing a revenue warning for its fiscal second quarter while unveiling a narrower-than-expected loss in its fiscal first quarter. The company offered a grim outlook for those banking on a pickup in demand: Ciena said there continues to be a high level of uncertainty surrounding service providers' near-term spending and that it continues to receive indications of more deployment delays from customers. Ciena lowered its second-quarter revenue projection to around $100 million, which compares to the $148.5 million that had been expected by analysts.
Among Ciena's peers, JDS Uniphase fumbled 7.1 percent and Corning lost 3.4 percent. Lucent fell 7 percent following a rally Wednesday after reaffirming its revenue forecast for the current quarter. In the battered networking group, Cisco Systems tumbled 8.3 percent and Juniper Networks gave up 5 percent.
The telecom sector's share of bad news came from BellSouth (NYSE: BLS - news) , which descended 7 percent after cutting 2002 earnings-per-share and revenue growth estimates, telling investors that its performance was negatively impacted by the recent currency devaluations and deteriorating economic conditions in Argentina and Venezuela. The telecom outfit also said its delayed entry into the long-distance market would weigh on results.
Among the carriers, Sprint slid 6.3 percent and Verizon lost 4.4 percent while WorldCom and Qwest Communications were holdouts, jumping 4.4 percent and 10 percent, respectively
And Intel (NasdaqNM: INTC - news) declined 5.5 percent, leading the Dow on the downside, after Banc of America Securities trimmed its 2002 earnings-per-share estimate on the bellwether on indications of sagging near-term demand. Rival Advanced Micro Devices erased 6.5 percent, sending the Philly Semiconductor Index down 6.4 percent.
Among other chip stocks, Kulicke & Soffa (NasdaqNM: KLIC - news) sagged 5.2 percent even as Merrill Lynch upgraded the stock to an intermediate-term "buy" from a "neutral" and to a long-term "strong buy" from a "buy," citing improving demand.
Broader market moves
Oil service shares put on a scintillating show, with the group's index piling on a 3.7-percent advance. Two separate weekly reports released from the American Petroleum Institute and the Energy Dept revealed an unexpected drop in crude supplies, sending crude for April delivery up 52 cents to $20.95. Read energy sector story.
Airline stocks rallied as investors had upbeat remarks from Merrill Lynch to zero in on. If current trends continue, Merrill said the industry could eke out a net profit of $270 million by the September quarter. The broker's favorites include Alaska Air, AMR, Continental Airlines, Delta Air Lines and Northwest. Among the named stocks, Alaska swelled 3 percent, Northwest 2.3 percent and Continental 3.5 percent.
General Electric (NYSE: GE - news) rose 0.2 percent after Goldman Sachs said the Dow stock was its "best pick" for 2002. GE, which is on Goldman's Recommended List, was selected by the brokerage because of its highly visible earnings growth and attractive valuation. Goldman also told clients that GE is taking action to address investor concerns regarding accounting quality, adding that the company already has conservative accounting practices.
Dow company Boeing (NYSE: BA - news) , which is having quite a day with investors sending it 2-percent higher, said it would cut 11 percent of its satellite unit operations in an effort to cut costs.
Treasurys trade mixed
Government bonds churned throughout the day in extremely mundane trading, moving higher late in the session as stocks fumbled.
The day's swarm of economic news was generally ignored by market watchers.
The 10-year Treasury note was up 6/32 to yield 4.865 percent while the 30-year government bond ascended 5/32 to yield 5.38 percent.
Thursday's economic calendar was indeed crowded: weekly initial claims rose 10,000 to 383,000 while the December trade numbers revealed a deficit of $25.3 billion, down from November's $28.5 billion and much less than the $28.3 billion that had been expected by economists. A combination of weak demand, low oil prices and a sturdy U.S. dollar produced the narrower deficit.
Finally, the Philadelphia Fed Index rose to 16 in February vs. the expected 14.7 reading. and check economic calendar and forecasts.
In the currency sector, the dollar gained 0.3 percent to 134.12 yen while the euro edged up 0.1 percent to 86.95 cents. |
