MARKET SNAPSHOT--Second largest point decrease
Nasdaq swoons
Sellers also take Dow down
By Julie Rannazzisi, CBS MarketWatch
Last Update: 4:58 PM ET Apr 12, 2000 Market Pulse
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NEW YORK (CBS.MW) -- The Nasdaq suffered its second largest point decrease in history Wednesday as sellers pounded technology stocks with a vengeance. The tech-packed index is now off 7.4 percent for the year and close to its intra-day low of 3,649 set on April 4.
"This week we've lost the support of the large-cap tech stocks. We've lost support from Sun, Oracle, Dell Intel and even Cisco Systems -- they were the last to come under pressure," said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum. And Cisco, Microsoft, Sun Microsystems, Oracle, Intel and Dell were among the top volume leaders on the Nasdaq Wednesday.
"[Tech] valuations are being scaled back across the board -- both in the companies with earnings and those without earnings," Hyman said.
In the broader market, bank stocks saw the best buying interest thanks to rosy earnings results from J.P. Morgan. Oil service, utility and paper stocks were also higher while drug, biotech and airline shares showed some weakness. In the tech arena, computer software, hardware, chip and networking issues took a hit.
The Dow Industrials ended off 161.95 points, or 1.4 percent, to 11,125.13 after rising as much as 138 points earlier in the session. The blue-chip barometer, which had remained positive for most of the session, was dragged down by its tech components -- Hewlett-Packard, Intel, IBM and Microsoft. Upside leaders were Procter & Gamble, DuPont and Boeing.
"The damage to the new economy stocks is distracting investors from the renewed strength in the old economy issues, and while their uptrends may not be as strong as the dotcoms, they could be much longer-lasting," said Robert Dickey, chief technical strategist at Dain Rauscher & Co.
"We've clearly got a short-term return to value," said Robin Griffiths, chief technical analyst at HSBC Securities.
The Nasdaq Composite plunged 286.29 points, or 7.1 percent, to 3,769.61. It's the index's first close below 4,000 on Jan. 31. (See 1-year chart for Nasdaq and Dow.)
Tom Peterson, publisher of the newsletter Bulls Eye Research, believes that until there's a confirmation of the Nasdaq's lows, buyers will just be trying to pick a bottom -- which entails greater risk but also potentially better rewards. Select names, he said, have already successfully tested their lows and represent good buying opportunities.
Diceky said the best buy point for tech stocks won't be in place until they've bottomed and based for a period of a few months -- not just days. In the near-term, he believes the drug, food, retail, healthcare and other manufacturing sectors will rule on the upside.
News that Goldman Sachs & Co. lowered revenue estimates on Microsoft put pressure on the tech sector. Goldman cut their revenue estimates for Microsoft's March quarter to $5.75 billion from $5.95 billion, citing sluggish PC demand. See full story.
The reduction in revenue estimates, Goldman analyst Rick Sherlund said, will shave about 2 cents in earnings per share, which may likely be offset by gains in the investment portfolio and thus does not result in earning-per-share changes. Microsoft remains on Goldman's recommended list. Shares of Microsoft (MSFT: news, msgs) lost 4 1/2 to 79 3/8.
In addition, an earnings warning from Compuware added to the market's anxiety. The company (CPWR: news, msgs) said it expects a profit from operations of 13 to 15 cents per share in the fourth quarter, well below the First Call estimate of 35 cents per share, citing revenue weakness from its professional services and products divisions. Shares tumbled 8 1/8, or about 40.5 percent, to 11 15/16. See full story. Banc of America, Robertson Stephens and J.P. Morgan downgraded Compuware to a "market performer" from a "buy" rating. And CS First Boston downgraded the stock to a "hold" from a "buy." See Rating Revisions.
The Standard & Poor's 500 Index lost 2.2 percent while the Russell 2000 Index of small-capitalization dropped 3.3 percent.
The biotech sector continued to fall, extending Tuesday's rout, with Merrill Lynch's Biotech Holdrs (BBH: news, msgs) off 5.6 percent. Biogen (BGEN: news, msgs) shares rebounded Wednesday, adding 2 1/8 to 55 1/8, after tumbling 18.5 percent on Tuesday.
Shares of Motorola (MOT: news, msgs) continued their descent, falling 8 to 116 on the heels of an 18 percent decline on Tuesday.
Volume came in at 1.15 billion on the NYSE and at 1.92 billion on the Nasdaq Stock Market. Winners beat losers by 15 to 14 on the Big Board while decliners bested advancers by 33 to 10 on the Nasdaq.
Meanwhile, a flurry of earnings reports hit the market Wednesday.
J.P. Morgan (JPM: news, msgs) checked in with first-quarter earnings of $3.37 per share, handily beating the First Call estimate of $2.81. Shares climbed 1 15/16 to 136 11/16. See story.
E-Trade (EGRP: news, msgs) broke even on a per share basis in the second quarter compared to the First Call estimate of a loss of 16 cents per share. The stock shed 11/16 to 22 3/4. View full story.
In other earnings news, Time Warner (TWX: news, msgs) posted a first-quarter profit from operations of 5 cents per share, beating the First Call estimate of 2 cents per share. The stock fell 5 3/4 to 90. Read story.
Dow Jones (DJ: news, msgs) posted a first-quarter profit from operations of 88 cents per share, beating the First Call estimate of 80 cents per share. The stock added 1/4 to 72 1/8. See full story.
Enron Corp. (ENE: news, msgs) posted first-quarter earnings of 40 cents per share, besting the First Call estimate by 3 cents. The stock advanced 2 to 71 1/8. Donaldson, Lufkin & Jenrette raised its price target on the stock to $97 from $82.
Genentech posted a first-quarter profit from operations of 28 cents per share, beating the First Call estimate by 2 pennies. Shares (DNA: news, msgs) fell 8 1/2 to 128.
And Fannie Mae (FNM: news, msgs) checked in with first-quarter earnings of $1.02 a share, 1 cent ahead of the First Call estimate. Shares rose 3 11/16 to 63 1/16.
In the bond market, prices lost ground as the dollar came under selling pressure and participants digested hawkish remarks from Federal Reserve Governor Laurence Meyer.
Meyer warned of risks of an overheating U.S. economy and said the Fed needs to be prepared to counter these imbalances.
The 10-year Treasury note fell 1/2 to yield 5.95 percent while the 30-year bond lost 24/32 to yield 5.82 percent.
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On the economic front, Wednesday saw the release of March import prices, up 0.3 percent, and export prices, which gained 0.4 percent.
Thursday will see the release of the March producer price index, which is expected to rise by 0.5 percent overall and 0.2 percent at the core, which excludes the volatile food and energy components.
In addition, March retail sales will be out Thursday and are expected to rise 0.3 percent overall and by 0.6 percent at the core. View economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen was recently trading at 105.85, off 1.0 percent from the previous close, while euro/dollar inched down 0.1 percent to 0.9580.
The Bank of Japan released an optimistic assessment on the Japanese economy in its April report, boosting the dollar. The BOJ said improvements in the economy are becoming distinct and that a recovery is being detected in some areas of private demand. See full story.
Meanwhile, comments from Bank of Japan Governor Masaru Hayami suggesting that the central bank's zero interest rate policy -- in place since Feb. 1999 -- may soon be abandoned created some waves in the market. Still, Hayami said the BOJ would not change its current policy unless it was clear that the income environment stopped deteriorating.
In the commodity arena, May crude climbed $1.36 to $25.50 while the Bridge CRB index rose 2.46 to 210.75. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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