<FONT COLOR=BLUE>MARKET SNAPSHOT--Dow ends below 10k on IBM plunge
Nasdaq modestly lower -- Intel climb helps
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:19 PM ET Oct 18, 2000
NEW YORK (CBS.MW) - While the major averages saw an incredible recovery from their lows Wednesday, the buying wasn't vigorous enough to achieve a close in the black.
A climb in shares of Intel and Microsoft helped the Nasdaq briefly claw its way back into the plus column but sellers re-emerged in the broad market in the final half hour of trading and a dour tone again descended upon Wall Street.
The Dow, meanwhile, was weighed down by a plunge in shares of IBM, which remained a drag on the index even as many of its components recovered during the session. And a sell-off in financial stocks following disappointing results from Chase Manhattan stifled attempts to gain ground, pushing the blue-chip barometer to its lowest close since March 14.
Inside technology, only software stocks managed an upside close while hardware and networking shares witnessed the greatest struggles. The broad market enjoyed gains in the paper, biotech, chemical and retail segments.
"We've seen [this kind of reversal] on several occasions," remarked Sam Stovall, senior investment strategist at Standard & Poor's.
"But we need to see follow-though buyers emerge during the next couple of days, not hours," Stovall said. How the market acts over the next days will be crucial, he continued, as it'll indicate whether buyers are willing to emerge on dips or whether people are looking to sell on any bounce.
The Dow Jones Industrials Average ($DJ) lost 114 points, or 1.1 percent, to 9,975.
The index fell below the psychological 10,000 mark for the first time since mid-March early in the session. In addition, at its nadir - off 435 points - the Dow fell to levels not seen since March 1999.
IBM (IBM) was the chief culprit behind the Dow's early plunge. The stock fell about 16.6 percent, or $18.75 to $94.25. Big Blue, while matching estimates, failed to meet Wall Street's revenue numbers and unforgiving investors punished the stock.
Investors have become increasingly fearful that a slowing economy will take a bigger-than-expected bite out of corporate revenues going forward. In the meantime, Wall Street is also grappling with a higher-than-expected climb in the consumer price index Wednesday, which comes in the wake of an expectedly vigorous rise in the producer price index last week.
Aside from IBM, Alcoa, Hewlett-Packard, Honeywell and Johnson & Johnson fell. Leading on the upside were shares of Intel, Microsoft, International Paper, Philip Morris and DuPont.
The Nasdaq Composite ($COMPQ) fell 42 points, or 1.3 percent, to 3,171. The tech-packed index fell to a new low for the year of 3,026 - which corresponded to a 187-point drop - in intra-day dealings. The Nasdaq 100 Index rose lost 33 points, or 1.0 percent, to 3,139 after briefly falling below the 3,000 mark early in the session.
"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.
The Standard & Poor's 500 Index ($SPX) shed 0.6 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks lost 1.0 percent.
Volume was very extremely heavy at 1.43 billion on the NYSE and at 2.51 billion on the Nasdaq Stock Market -- the third-heaviest trading day for the Nasdaq. Maket breadth remained very shabby, with decliners pouncing on advancers by 19 to 10 on the NYSE and by 26 to 15 on the Nasdaq.
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. |
