<FONT COLOR=BLUE>MARKET SNAPSHOT--Steep declines for Dow, Nasdaq
Internet stocks plunge
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:29 PM ET Oct 11, 2000
NEW YORK (CBS.MW) -The Nasdaq tumbled for a fifth straight session Wednesday on nagging worries that the revenue growth of many once-hot tech companies won't be strong enough to justify current valuations.
Still, the tech-packed index managed a rebound from its nadir as the chip sector recovered in afternoon trading. The Dow Industrials, however, extended losses as the session progressed due to steep declines in its tech and telecom components.
Cornering the stats, the Nasdaq is just 4.1 percent from its 2000 intra-day low of 3,042 reached in late May and is off about 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 9.4 percent of its value this year.
Inside the tech arena, Internet stocks paced the Nasdaq's decline as the Goldman Sachs Internet Index ($GIN), off 8.6 percent on the day, fell to levels not seen since December 1998 amid a purge in Yahoo shares. Networking and computer software shares were also hard hit and the Philadelphia Semiconductor Index ($SOX) is hovering at levels not seen since January.
In the broad market, the biggest struggles took place in the bank and airline sectors while the usual suspects witnessed additional buying interest: oil and oil service shares, utility and drug issues. Brokerage shares witnessed a rapid turnaround late in the day and paper stocks also managed a gain amid the tech dumping.
The Dow Jones Industrials Average ($DJ) declined 110.61 points, or 1.1 percent, to 10,413.79.
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 $1.50 to $56.56.
The biggest downside movers included Alcoa, AT&T, Hewlett-Packard, Intel, SBC Communications, Citigroup and Home Depot. Managing decent gains were shares of International Paper, Microsoft, Procter & Gamble and Boeing.
And Microsoft (MSFT) climbed 2.2 percent to $55.75. A federal appeals court set a four-month-plus schedule for hearing Microsoft's antitrust appeal Wednesday.
The Nasdaq Composite ($COMPQ) erased 72.05 points, or 2.2 percent, to 3,168.49 after falling as much as 137 points at its low point Wednesday. The Nasdaq 100 Index ($NDX) gave up 87.76 points, or 2.8 percent, to 3,100.53.
"It doesn't appear that we've put in our lows. I [think there are] more sellers out there that need to be washed out," said Joe Liro, market analyst at Stone & McCarthy Research Associates, referring to the unloading of shares that has been taking place on upticks.
Once the lows are in place, however, Liro believes the buying will emerge from value players in the quality names. He hasn't lost faith in a fourth-quarter rally.
"All told, third-quarter earnings will be pretty decent. There's still a fair amount of upside potential in the economy," Liro added.
Volume has been increasing on down days, which means a selling climax may be close, observes John Hughes, market analyst at Shields & Co. Using the increase in put buying as a contrarian indicator, he said the climb in bearish sentiment may signal that the end of the selling spree is near.
And once a bottom is in place, the healing process can begin.
Hughes said it's necessary to create some fear in the market to create the bottom from which shares can spring.
"Historically, the market makes lows in October. [In addition], election years tend to be positive ones for the market."
The Standard & Poor's 500 Index ($SPX) subtracted 1.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks erased 1.4 percent.
Volume was heavy at 1.39 billion on the NYSE and at 2.03 billion in the Nasdaq Stock Market. Market breadth was sharply negative, with decliners pouncing on advancers by 20 to 9 on the NYSE and by 28 to 12 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. The company saw its shares downgraded by Janney Montgomery, Dain Rauscher and SG Cowen while Prudential Securities upped its rating on the stock to a "strong buy" from "accumulate."
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 $5.91.
Bank stocks declined but the Amex Securities Broker/Dealer Index ($XBD) added 1.1 percent in late-day action as comments from Morgan Stanley Dean Witter reassured investors. In recent sessions, speculation of losses in the company's high-yield bond portfolio pummeled shares. Morgan Stanley (MWD) said net-trading revenue in its high-yield bond business is positive and that markdowns in its high yield portfolio taken in the third quarter reduced earnings by less than 4 cents a share. The stock climbed $3.75 to $78.25 and shares of companies in it peer group popped as well, with Merrill (MER) up $1.25 to $59.25 and Lehman Brothers (LEH) adding $1.19 to $125.
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 $66.56.
Retail stocks were also among the losers in the broad market Wednesday as the S&P Retail Index ($RLX) shaved 2.0 percent, held down by yet another profit warning in the group. The index is off 24 percent for the year.
Nordstrom (JWN) was the latest in a sting of retailers to warn, informing investors that it'll post a profit from operations of 4 to 7 cents a share in the third quarter versus the First Call estimate of 24 cents a share. Shares fell $1, or 6.4 percent, to $14.69. Among other losers in the retail group, J.C. Penney fell 44 cents to $9.06 and Dow components Wal-Mart and Home Depot shed 1.9 percent and 2.2 percent, respectively.
Bond focus
Treasury prices turned lower as stocks saw some significant improvement from session lows. Further, governments must contend with an onslaught of issuance in the corporate market.
The 10-year was off 1/32 to yield ($TNX) 5.785 percent while the 30-year bond shed 10/32 to close at a yield ($TYX) of 5.84 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 erased 0.2 percent to 107.62 while euro/dollar slipped 0.4 percent to 0.8680.
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