MARKET SNAPSHOT
Nasdaq closes at lows of the year
Broad-based sell off envelopes market
By Julie Rannazzisi, CBS MarketWatch
Last Update: 4:35 PM ET May 23, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- A plunge in Internet and big-name tech stocks produced a bruising 6 percent plunge in the Nasdaq Composite and sent the index to its lows of the year.
With no catalyst to inspire buyers and investors worried that higher interest rates will take a big bite out of earnings growth going forward, the market continues to drift lower on light volume.
David Powers, senior technology analyst at Edward Jones, said this kind of market action will continue until there's evidence that the economy is slowing and that the Fed is done tightening.
"This volatility reflects people's confusion. We're currently in a news vacuum," said Peter Boockvar, equity strategist at Miller, Tabak & Co. The market, he added, must wait for next week's stream of economic news to begin the debate on how the Fed will act at the June 27-28 Federal Open Market Committee meeting.
In the broader market, paper stocks fell, extending Monday's losses, following a number of downgrades from a brokerage. Also lower were utility and retail stocks. Bucking the trend were shares of oil service, bank and airline shares. The tech sector saw the greatest carnage in Internet and chip stocks.
The Dow Industrials slipped 120.28 points, or 1.1 percent, to 10,422.27.
Downside movers included Intel, International Paper, General Motors and Alcoa. Moving on the upside were shares of Boeing, American Express, Merck and Eastman Kodak.
The Nasdaq Composite tumbled 199.92 points, or 5.9 percent, to 3,164.29 and reached an intra-day while the Nasdaq 100 index fell 241.57 points, or 7.4 percent, to 3,023.14.
The tech market's kingpins continue to deteriorate, keeping optimism at bay and buying interest at a standstill.
Boockvar said he's closely monitoring the performance of Cisco Systems and Sun Microsystems.
On Monday, the market recovered late in the session because these two tech bellwethers managed to hold their 200-day moving averages on the downside, Boockvar observed. "It's important that these levels hold," he added. "If they do, we'll be OK. But if they don't, look out below."
"We're operating in a very unusual environment. We're trapped by the Fed's rate hikes [and] a lot of churning and distribution [is] taking place. It's hard to identify leadership," opined Bill Schneider, head of block trading at UBS Warburg.
"[And] the illiquidity is exasperating the market's moves. I don't see an easy end to this," he continued.
The Standard & Poor's 500 Index subtracted 1.9 percent while the Russell 2000 Index of small-capitalization stocks dropped 2.7 percent.
Volume came in at 868 million on the NYSE and at 1.32 billion on the Nasdaq Stock Market. Decliners outpaced advancers by 16 to 13 on the NYSE and by 27 to 13 on the Nasdaq.
Specific movers
MedQuist surged 6 to 45 1/8. Royal Philips Electronics (PHG: news, msgs) -- the largest electronics company in Europe -- said it'll purchase a 60 percent stake in the company (MEDQ: news, msgs) for approximately $1.2 billion in cash, or $51 per share. See full story. Royal Philips added 3/4 to 39 15/16.
Shares of Global Crossing shed 29/64 to 27 9/16. The company (GBLX: news, msgs) said late Monday that it's seeking more than $1 billion in a lawsuit against Tyco Submarine Systems -- a unit of Tyco International (TYC: news, msgs) -- for damages stemming from a dispute involving fiber optic installation. See related story. Tyco edged up 3/16 to 44 3/16.
Veritas Software (VRTS: news, msgs) jumped 4 1/8 to 107. Veritas Software, Oracle (ORCL: news, msgs) and Sun Microsystems (SUNW: news, msgs) announced a three-way strategic alliance to provide a single-source of coordinated support and problem resolution that will enable customers to rapidly build more robust e-business infrastructures. Sun shares slipped 7/8 to 79 while Oracle lost 9/16 to 67 1/4.
Shares of J.D. Edwards added 1/8 to 12 5/8. Late Monday, the company (JDEC: news, msgs) said it will cut 800 jobs worldwide as part of a company-wide cost-cutting effort. J.D. Edwards plans to cut its workforce by 13 percent and use the Internet to lower procurement costs. See full story. Earlier this month, the company warned that it expected second-quarter results to show an operating loss of between $20 million and $25 million. First Call had expected a profit of 2 cents a share.
Shares of Zany Brainy eased 5/16 to 2 5/8. The company (ZANY: news, msgs) checked in with a first quarter loss of 23 cents a share, matching the First Call estimate. The company lost 6 cents a share in the year-ago period.
Oneida (OCQ: news, msgs) shares added 1/4 to 18 13/16. The company reported first-quarter earnings of 45 cents a share, in line with the First Call estimate. The company made 40 cents a share in the year-ago period.
See full story.
The brokerage sector was mildly higher, with the AMEX Securities Broker/Dealer Index ($XBD: news, msgs) up 1.4 percent. But shares of many online brokerages continued to lose ground, adding to Monday's losses.
E-Trade (EGRP: news, msgs) shed 13/64 to 16 19/64. Prudential cut its price target on the stock to $45 from $62 but reiterated its "strong buy" recommendation. See Rating Revisions. Ameritrade (AMTD: news, msgs) lost 3/8 to 12 3/16.
The Philadelphia Forest Paper Products Index ($FPP: news, msgs) shed 4.1 percent -- extending Monday's losses -- and is down a heady 18.2 percent on the year.
Deutsche Banc Alex. Brown lowered its rating on a plethora of paper companies Tuesday, including Georgia Pacific (GP: news, msgs), which was downgraded to a "market perform" from a "buy," International Paper (IP: news, msgs), lowered to a "buy" from a strong buy," and Weyerhaeuser (WY: news, msgs), which was cut to a "market perform" from a "buy."
International Paper lost 1 3/8 to 36 13/16, Georgia Pacific fell 3 1/4 to 34 7/16 while Weyerhaeuser fell 4 to 47 7/8.
Shares of Dow component Gillette (G: news, msgs) fell 1 13/16 to 35 15/16. Merrill Lynch dropped its $1.25 earnings-per-share estimate for 2000 to $1.23, citing, among others, challenges from a soft euro and rising interest rates.
Dow component General Motors (GM: news, msgs) lost 1 15/16 to 76 1/16 following a bruising sell off on Monday. The automaker completed an offer to grant investors shares in its Hughes Electronics affiliate in exchange for shares of GM common stock.
Hughes (GMH: news, msgs) gained 2 3/4 to 99 1/2 after GM said the exchange offer was significantly oversubscribed. See full story.
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Government prices turned higher late in the session in response to the bloodbath in the equity market, which generated safe-haven flows.
There are no economic releases on tap until Thursday, when the revision to first-quarter productivity will be released. See economic calendar and forecasts and historical economic data.
The 10-year Treasury note advanced 3/32 to yield 6.44 percent and the 30-year bond was up 11/32 to yield 6.16 percent. See Bond Report.
In currency markets, dollar/yen lost 0.7 percent to 106.45 while euro/dollar inched up 0.4 percent to 0.9060.
In the commodity market, July crude rose 5 cents to $28.78 while the Bridge CRB index gained 0.42 to 224.08. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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