<font color=BLUE> MARKET SNAPSHOT--Nasdaq whacked; Dow slumps
Chips take a drubbing; online brokers hard hit
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 5:15 PM ET Sep 8, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - The Nasdaq fell on its face Friday as chip stocks were smacked amid investor worries over the group's revenue growth going forward. The widespread selling pushed the Nasdaq to its first close below the 4,000 level in almost three weeks.
With market participants concerned about the quality of third-quarter earnings, the market has been unable to make any headway this week to follow up on last week's buying spree.
"We've been locked in a range," said Joseph Liro, market analyst at Stone & McCarthy Research Associates, of the sideways action that has characterized the market in the past week.
"The trend has been ambiguous. There are a lot of conflicting forces out there. We're likely to stay in this range till we get into the third-quarter earnings season," Liro said.
In the broad market, a profit warning from National Discount Brokers hobbled the online brokerage sector. Also pressuring the market was a drop in shares of oil service and paper stocks. Within technology, computer hardware, Internet and networking shares retreated alongside the semis.
The Dow Jones Industrials Average ($DJ: news, msgs) subtracted 39.22 points, or 0.3 percent, to 11,220.65.
DuPont (DD: news, msgs), the biggest drag on the Dow Thursday in the wake of its earnings warning, continued to slip, shedding 3.1 percent to $40.81.
Also keeping the Dow in the red were losses in shares of Honeywell, General Motors, IBM, Intel and Walt Disney. Keeping the blue-chip barometer's losses in check were gains in shares of Home Depot, Wal-Mart, SBC Communications and Citigroup.
The Nasdaq Composite ($COMPQ: news, msgs) tumbled 119.90 points, or 2.9 percent, to 3,978.45 and the Nasdaq 100 Index ($NDX: news, msgs) slid 139.87 points, or 3.5 percent, to 3,813.49.
"Semiconductors are the big wild card. The question is: Are we heading for another year of growth or the end of the cycle?" remarked Mike Sheldon, chief market strategist at Spencer Clarke. The uncertainty over the semis is creating a lot of volatility in the marketplace, he added.
"After we get third-quarter earnings warnings out of the way, the market's bellwethers are likely to provide more leadership. The confession period is having a big effect on shares," Sheldon said.
Sheldon remains positive on the market over the next several months. He believes stable interest rates and relatively strong earnings will continue to underpin prices.
Liro, while optimistic on the market's prospects for the fourth quarter, remains concerned about the rising price of oil, which he believes will heavily weigh on the economy and consumer spending going forward.
The Standard & Poor's 500 Index ($SPX: news, msgs) erased 0.5 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks slipped 1.3 percent.
Volume checked in at 961 million on the NYSE and at 1.48 billion on the Nasdaq Stock Market. Market breadth was sloppy, with decliners pouncing on advancers by 15 to 13 on the NYSE and by 25 to 15 on the Nasdaq.
Separately, Trim Tabs reported that all equity funds had outflows of $800 million during the week ended September 6 versus inflows of $5.6 billion during the previous week. Equity funds investing primarily in U.S. stocks had outflows of $500 million compared with inflows of $5.4 billion in the prior week. In the meantime, bond funds had inflows of $700 million compared with outflows of $900 million in the prior week.
Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray, observed that money market funds scored their largest inflow since the week of August 2 but suggested to not read too much into the drastic slowdown in equity inflows in the latest week.
Belski notes, in fact, that the current data includes the holiday shortened trading week. "Given the current ambiguous market conditions, coupled with the phantoms of recent Septembers and Octobers (1997, 1998 and 1999), we believe that the stock piling of cash is a major positive for the market heading into the fourth quarter," he concluded.
Sector movers
Chip stocks remain the market's sore spot. The sector took another hit Friday, with the Philadelphia Semiconductor Index ($SOX: news, msgs) off 5.0 percent. The index rose 16 percent in August has shaved nearly 10 percent since the start of September.
The biggest downside movers were witnessed in the chip equipment segment. Among the losers: Teradyne (TER: news, msgs), off 7.3 percent to $57.38, KLA-Tencor (KLAC: news, msgs), off 8.8 percent to $55.75, and Kulicke and Soffa Industries (KLIC: news, msgs), down 8.1 percent to $15.69.
The online brokerage arena took its lumps as National Discount Brokers warned of an earnings shortfall. The company (NDB: news, msgs) said it expects to report a loss of 6 to 9 cents a share in its fiscal first quarter versus the First Call estimate for a gain of 9 cents a share. NDB said that while total revenues increased over the previous year, revenues in the first quarter of fiscal 2001 were negatively impacted by adverse market conditions. The stock dropped 22.3 percent, or $8 to $27.81. Other losers in the group included Ameritrade (AMTD: news, msgs), off 5.4 percent to $19.69, and E-Trade (EGRP: news, msgs), off 4.3 percent to $18.25. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) shed 0.7 percent.
Other interest-rate sensitive sectors such as the banks and the utilities gained significant ground. Bank stocks have posted gains throughout the week, with consolidation speculation providing the group with a healthy bid. The S&P Bank Index ($BIX: news, msgs) rose 2.3 percent Friday and has risen 5.5 percent this week. The Dow Jones Utilities Average ($UTIL: news, msgs), meanwhile, reached a record Friday, touching an intraday high of 386.30 and ending up 2.7 percent.
Oil and oil service shares slumped on the heels of a hefty drop in crude oil prices Friday. October crude, in fact, shaved $1.76 to $33.63 after reaching fresh 10-year highs on Thursday. Concerns that Saudi Arabia will lead OPEC in agreeing to increase production at this weekend's meeting in Vienna brought out the sellers. The Saudi Arabia oil minister said OPEC would do its part to bring oil prices down to its targeted range between $22 and $28 a barrel. See full story. The Philadelphia Oil Service Index ($OSX: news, msgs) fell 2.1 percent, with Halliburton (HAL: news, msgs), down 2.6 percent to $51.06, and Schlumberger (SLB: news, msgs), off 1.4 percent to $82.50.
Retail shares have staged an impressive rebound since the start of the month, rising for five straight trading sessions. The S&P Retail Index ($RLX: news, msgs) rose 3.1 percent, getting help from an upgrade of a number of retailers by Morgan Stanley Dean Witter. The brokerage upped its ratings to an "outperform" from "neutral' on Limited (LTD: news, msgs), Abercrombie & Fitch (ANF: news, msgs) and TJX Companies (TJX: news, msgs), all of which rose heartily. The rise in retail stocks limited the damage on the Dow Industrials Friday as both Home Depot and Wal-Mart checked in with healthy gains.
See After Hours for post-market trading activity.
Treasury focus
Bond prices caught a slight bid Friday, with gains concentrated in the long end of the Treasury curve, as weakness in the equity arena and dollar strength provided some support.
Friday saw the release of July consumer credit, which grew 7.7 percent or $9.4 billion. View Economic Preview, economic calendar and forecasts and historical economic data.
The vacuum of fresh news to chew on this week has kept Treasurys within the narrowest of confines. But next week carries with it a plethora of data -- including the inflation figures and the retail sales report -- which may help the market plot a move.
The 10-year Treasury note added 5/32 to yield ($TNX: news, msgs) 5.735 percent and the 30-year bond rose 9/32 to yield ($TYX: news, msgs) 5.705 percent. See Bond Report.
In the currency arena, dollar/yen (C_JPY: news, msgs) climbed 0.9 percent to 106.04 while euro/dollar (C_EUR: news, msgs) lost 0.5 percent to 0.8676.
The yen responded negatively to rating agency Moody's Investors Service's downgrade of Japan's sovereign debt rating to an "Aa2" from an "Aa1." A negative outlook was also maintained. In Feb. 2000, Moody's put Japan's debt under review for a possible downgrade. The rating agency said the downgrade Friday was prompted by policy shortcomings and structural problems that have resulted in a level of government indebtedness that has become the highest, relative to GDP, among the advanced industrial economies. Read the full story.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
