<FONT COLOR=BLUE>MARKET SNAPSHOT--Dow fumbles; Nasdaq off lows
IBM plunges; Intel jump helps chips; Chase misses,
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 12:29 PM ET Oct 18, 2000
NEW YORK (CBS.MW) - The Nasdaq witnessed a magnificent reversal Wednesday as chip stocks staged a rapid turnaround, led by behemoth Intel, which climbed over 7 percent. The tech-packed index has been on a dizzying ride Wednesday morning, falling to a new low for the year at 3,026, off 187 points, before briefly clawing its way into the plus column.
The Dow Industrials, though still struggling with triple-digit losses due to heavy losses in shares of IBM, erased over half of a 435-point sell off out of the gate.
Investors have become increasingly fearful that a slowing economy will take a bigger-than-expected bite out of corporate revenues going forward. Wall Street, also grappling with the higher-than-expected climb in the consumer price index Wednesday, continues to climb a wall of worry.
"The landscape has clearly changed," said Bill Schneider, head of block trading at UBS Warburg, adding that the buy-the-dip mentality is being sorely challenged these days.
"Companies have been unable to live up to the expectations priced into the market. Bounces have been used as selling opportunities," Schneider added.
Market participants, Schneider continued, had become overly complacent and accustomed to oversized gains in recent years. The return to reality has been a painful one indeed.
Inside technology, the semis were the only area in the black. Witnessing the greatest struggles were shares of networkers and computer hardware stocks. The broad market saw steep declines in the financial sector, led by brokerage shares, utility and airline stocks. Moving higher were paper, biotech and retail issues.
The Dow Jones Industrials Average ($DJ) lost 139 points, or 1.4 percent, to 9,949, falling below the psychological 10,000 level for the first time since mid-March.
IBM (IBM) was the chief culprit behind the Dow's plunge, tanking about 14 percent, or $16.25 to $96.75. Big Blue, while matching estimates, failed to meet Wall Street's revenue numbers and unforgiving investors punished the stock.
Aside from IBM, heavy selling was seen in the Dow's financial shares, with J.P. Morgan and Citigroup sharply lower. Chase Manhattan's earnings miss heavily weighed on the broad market. Also losing significant ground: Walt Disney, Hewlett-Packard, AT&T and General Electric. Limiting further Dow hemorrhaging was Intel, which gained 4.8 percent.
The Nasdaq Composite ($COMPQ) lost 30 points, or 1.0 percent, to 3,183 while the Nasdaq 100 Index added 8 points, or 0.2 percent, to 3,180 after briefly falling below the 3,000 mark early in the session.
The Standard & Poor's 500 Index ($SPX) dropped 0.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks lost 1.0 percent.
Volume checked in at 729 million on the NYSE and at 1.31 billion on the Nasdaq Stock Market. Market breadth remained horrible, with decliners pouncing on advancers by 20 to 7 on the NYSE and by 25 to 12 on the Nasdaq.
Listen to midday market report.
Inside the data
The September consumer price index rose by 0.5 percent, more than the expected 0.4 percent increase.
The core, which excludes the volatile food and energy components, edged up 0.3 percent versus an expected 0.2 percent rise.
"A host of factors lifted the core above its recent 0.2 percent per month trend: tobacco prices rose 3.5 percent and apparel prices rose 1.6 percent. The rise in apparel prices follows a very sharp downward trend in recent months," noted Ian Shepherdson, chief U.S. economist at High Frequency Economics.
"Some rebound was overdue but it does not change the very favorable trend. The rise in tobacco prices is not worrying either -- it is not indicative of broad inflation trends. The rise in energy prices was largely anticipated and will not be repeated in October. Overall, the numbers aren't good but the details are less alarming," Shepherdson concluded.
In other economic news, housing starts rose 0.3 percent to a 1.53 million rate in September while building permits climbed 1.3 percent to a 1.506 million rate. View Economic Preview, economic calendar and forecasts and historical economic data.
Earnings watch
Intel (INTC) checked in late Tuesday with a third-quarter profit from operations of 41 cents a share, three cents ahead of the First Call estimate. Revenue rose to $8.7 billion from $7.3 billion in the year-ago quarter, topping estimates of $8.6 billion in sales. The chip giant had warned in late September that revenue would fall below its previous expectations due to waning demand in Europe. Shares climbed 6.7 percent, or $2.44 to $38.63 and helped the Philly Semiconductor Index ($SOX) rose 1.0 percent.
"Intel's cautious guidance for the fourth quarter left little doubt that the PC market is having difficulty gaining traction during what is typically its strongest time of the year," said UBS Warburg in a note to clients. The firm maintained its "buy" rating on Intel but lowered its target on the stock to $45 from $66.
CS First Boston, meanwhile, cut its rating on Intel to a "buy" from a "strong buy" while Chase H&Q upped its rating on the chip maker to a "buy" from "market perform."
Turning to IBM's news, Big Blue registered a third quarter profit of $1.08 a share late Tuesday, in line with Wall Street estimates. Revenue, however, came in at $21.8 billion compared with $21.1 billion during the same quarter one year ago. But First Call had estimated revenue of $22.4 billion. The Goldman Sachs Hardware Index ($GHA) fell 5.5 percent as IBM dragged down the other PC makers. Fellow Dow-component H-P, for example, gave up 3.3 percent to $87.50.
Among the other tech heavyweights, EMC (EMC), a stock that has held up extremely well amid the turmoil enveloping the tech sector, posted a third-quarter profit of 20 cents a share, beating the First Call estimate by a penny and the 14 cents earned in the year-ago quarter. Revenue rose 34 percent in the quarter. Still, shares fell 5.7 percent, or $5.38 to $89.56.
Chase Manhattan (CMB), which missed earnings estimates Wednesday morning, weighing heavily on sentiment. Financials were the biggest losers within the broad market as the Amex Securities Broker/Dealer Index ($XBD) erased 4.7 percent while the Phlx/KBW Bank Index ($BKX) gave up 4.6 percent.
Chase posted a third-quarter profit from operations of 68 cents a share, missing the First Call estimate of 93 cents a share. Chase said its Chase Capital Partners unit saw unrealized write-downs, due largely to lower prices for publicly held securities. The stock fell 10.9 percent to $33.75.
More Dow companies report
J.P. Morgan (JPM), which is in the process of being acquired by Chase, posted third-quarter earnings of $2.77 a share, beating the First Call estimate of $2.63. The stock plunged 12 percent to $121.38.
Boeing (BA) checked in with a third-quarter profit from operations of 72 cents a share, beating the First Call estimate of 67 cents a share and 56 cents in the year-ago quarter. Shares lost 13 cents to $60.38.
Eastman Kodak (EK) checked in with a third-quarter profit from operations of $1.40 a share, beating the First Call estimate by 3 cents. However, for the fourth quarter, Kodak expects earnings-per-share of $1 to $1.15, lower than the current Wall Street forecast of $1.24 per share. The stock fell 2.4 percent, or 88 cents to $35.56.
International Paper (IP) registered a third-quarter profit from operations of 53 cents a share, a penny ahead of the First Call estimate. The stock added 6 cents to $26.88 and paper stocks gained minor ground as well, taking the Philly Forest Paper Products Index ($FPP) up 3.0 percent.
Finally, United Technologies (UTX) posted third-quarter earnings of 98 cents a share, 2 cents past the First Call estimate. Shares added 31 cents to $70.
Treasury action
In the bond market, prices rose even amid the higher CPI numbers as the drubbing of equities provided a "flight-to-quality" bid, with short-dated issues reaping the lion's share of the gains.
The 10-year Treasury note gained 12/32 to yield ($TNX) 5.63 percent while the 30-year bond added 3/32 to yield ($TYX) 5.76 percent.
In other news, Treasury announced it'll buyback $1.5 billion in long-dated issues maturing between Feb. 2015 and Nov. 2018 on Thursday.
Cornering the currency market, the dollar lost 0.2 percent to 107.75 against the yen while euro/dollar lost 0.3 percent to 0.8522. |
