<FONT COLOR=BLUE>MARKET SNAPSHOT--Nasdaq bounces from lows
Chips pace advance but Net stocks falter
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 12:58 PM ET Oct 11, 2000
NEW YORK (CBS.MW) -The Nasdaq faltered for the fifth straight session Wednesday amid concerns that the revenue growth of many tech companies going forward won't be able to justify current valuations. But the index came well off session lows as the chip sector staged a rapid about face.
Volume has been increasing on down days, which means a selling climax may be close, said John Hughes, market analyst at Shields & Co. Using the increase in put buying as a contrarian indicator, he said the increase in bearishness may signal that the end of the selling spree is near.
And once a bottom is in place, the healing process can begin.
Hughes said it's necessary to create some fear in the market to make a bottom from which shares can spring "Historically, the market makes lows in October. [In addition], election years tend to be positive ones for the market."
Cornering the stats, the Nasdaq is just 4.9 percent from its 2000 intra-day low of 3,042 reached in late May and is off 22 percent for the year. The Dow Industrials has also taken its lumps this year but has fared a lot better amid the current tech turmoil, losing 8.6 percent of its value this year.
Inside the tech arena, Internet stocks paced the Nasdaq's decline as the Goldman Sachs Internet Index ($GIN), off 4.7 percent, fell to lows not seen since December 1998 amid the purging in Yahoo shares. Networking and computer software shares were also hard hit. But the Philadelphia Semiconductor Index ($SOX) jumped 3.1 percent after falling to levels not seen since January earlier in the session.
In the broad market, the biggest struggles took place in the financial and airline sectors while the usual suspects witnessed additional buying interest: oil and oil service shares, utility and drug issues. Paper and consumer product stocks also managed a modest gain amid the tech dumping.
The Dow Jones Industrials Average ($DJ) subtracted 54 points, or 0.5 percent, to 10,469.
General Electric (GE) reported third-quarter earnings of 32 cents a share, matching the First Call estimate and ahead of the 27 cents earned in the year-ago quarter. GE also said it's comfortable with the First Call estimate of $1.27 per share for 2000. The stock was off $1.63 to $56.44.
Downside movers included AT&T, Alcoa, Citigroup, IBM and Walt Disney. Keeping the Dow's losses in check were advances in shares of International Paper, 3M, Procter & Gamble, Boeing, Procter & Gamble and Honeywell.
And Microsoft (MSFT) climbed 3 percent to $56.26. A federal appeals court set a four-month-plus schedule for hearing Microsoft's antitrust appeal Wednesday.
The Nasdaq Composite ($COMPQ) erased 9 points, or 0.3 percent, to 3,231 after falling as much as 137 points at its nadir Wednesday. The Nasdaq 100 Index ($NDX) gave up 1 point to 3,187.
The Standard & Poor's 500 Index ($SPX) subtracted 0.7 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks erased 1.2 percent.
Volume was heavy at 809 million on the NYSE and at 1.34 billion on the Nasdaq Stock Market. Market breadth was sharply negative, with decliners pouncing on advancers by 19 to 8 on the NYSE and by 27 to 11 on the Nasdaq.
Sector movers
Keeping sentiment negative, Lucent Technologies dove $9.15 or 29.5 percent, to $22.13. The stock is a component of Merrill Lynch's Broadband Holdrs (BDH), which shaved 5.4 percent. After the close Tuesday, Lucent (LU) said it won't meet Wall Street's fourth-quarter numbers due to slower growth in its optical business, declining sales in circuit-switching equipment and higher reserves for bad debt. The company said it'll now earn 17 cents to 18 cents a share, well below the 27-cent First Call consensus estimate. Further, the disappointing fourth-quarter results will also force Lucent to lower estimates for fiscal 2001.
Motorola said after the closing bell Tuesday that it made 26 cents in the third-quarter, matching the First Call estimate and ahead of the 16 cents earned in the same quarter last year. The stock (MOT) dropped $5.75, or 22 percent, to $20.50. In a conference call Wednesday, Motorola said it'll take a fourth-quarter charge for product cancellation and downwardly revised its profit margin for PCS handsets to 6.5 percent from 10 percent in the fourth quarter. Among Motorola's competitors, Nokia fell 4.6 percent to $33.38.
Net stocks got clobbered as Yahoo (YHOO) plunged $10.25, or 12.5 percent, to $72.44. While Yahoo managed to top Wall Street's profit expectations late Tuesday, revealing earnings-per-share of 13 cents -- a penny ahead of the First Call estimate - the Net bellwether said sales and marketing costs could rise faster than revenue in the foreseeable future. With investors worried that struggling online companies will spend less and less on advertising going forward, Yahoo shares have come under significant pressure in recent months, shedding about 47 percent of their value over the last two months. Other big losers among Net stocks included Lycos (LCOS), off 11 percent to $46.2, America Online (AOL), off 6 percent to $53.87, and Priceline.com (PCLN), off 13 percent to $5.91.
Bank and brokerage stocks extended declines Wednesday as worried investors flocked out of the sector. The Amex Securities Broker/Dealer Index ($XBD) lost 1.9 percent, trading down for the fourth straight session., while the S&P Bank Index ($BIX) erased 1.3 percent.
Brokerages lost significant ground on Tuesday amid renewed concerns over losses in high-yield bond portfolios and worries that the drop in the Nasdaq will hurt investment banking revenue. On the earnings front, PaineWebber (PWJ) posted third-quarter earnings of 85 cents a share, beating the First Call estimate by 2 pennies but less than the 86 cents made in the year-ago period. Shares were off $1.69 to $66.56.
Bond focus
Treasury prices turned mixed as stocks saw some significant improvement from session lows. Further, governments must contend with an onslaught of issuance in the corporate market.
The 10-year was up 2/32 to yield ($TNX) 5.775 percent while the 30-year bond shed 7/32 to close at a yield ($TYX) of 5.835 percent.
The economic agenda saw the second-tier release of wholesale inventories, which rose 0.6 percent in August. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, dollar/yen added 0.1 percent to 107.90 while euro/dollar edged up 0.1 percent to 0.8722. |
