U.S. stocks fall sharply on profit worries, other woes
By Haitham Haddadin
NEW YORK, Dec 20 (Reuters) - U.S. stocks fell sharply on Wednesday, sending the technology-heavy Nasdaq to its lowest level in more than a year and a half on recession worries, profit warnings, and downgrades on technology stalwarts Cisco Systems and IBM Corp.
The steep decline, which also hit blue chips, came a day after the U.S. Federal Reserve warned of the risk of a further economic slowdown but did not cut short-term interest rates.
Adding to the heat were a batch of corporate profit warnings from companies confessing that profits would disappoint, and downgrades on high-profile technology companies, including Nasdaq bellwether Cisco Systems (NASDAQ: CSCO), and International Business Machines (NYSE: IBM), the world's largest computer company.
"Confidence is being trimmed back by the combustible combination of a slowing U.S. economy, earnings disappointments and the Fed's inability to lower interest rates immediately," said Alan Ackerman, a market strategist at Fahnestock and Co. "The mood is glum and perplexing."
The Nasdaq Composite Index was off 177.23 points, or 7.06 percent, at 2,334.48, as it sank to its lowest intra-day level since March 24, 1999. Nasdaq, which had its seventh down day in a row, is now at half its March 10 high of 5,132.52.
The blue chip Dow Jones industrial average was down 227.9 points, or 2.15 percent, at 10,356.47, dragged lower by IBM. The broader Standard & Poor's 500 Index was down 39.32 points, or 3.01 percent, at 1,266.28, its worst level in more than a year.
Media stocks, both traditional like Time Warner (NYSE: TWX) and Internets like Infospace Inc (NASDAQ: INSP), were among the worst performing groups. But the selling was indiscriminate, hitting the shares of software companies, computer networkers, telecommunications, computer makers and semiconductor issues.
Breadth on Nasdaq was overly negative, with nearly five stocks falling for each one rising.
The tech sector again bore the brunt of the selling as many stocks remain overvalued, despite their pullback from year-highs, especially considering the likelihood of further economic slowdown, analysts said.
Wall Street powerhouse Merrill Lynch soured on IBM and computer boxmaker Hewlett-Packard Co. (NYSE: HWP), cutting their investment ratings and warning clients it saw companies buying fewer computer systems from them.
Both shares fell sharply on the New York Stock Exchange, hitting new 52-week lows at $84-13/16 and $29-7/16, during the session, and putting the heat on the Dow gauge.
Cisco Systems led Nasdaq's fall. The Internet gear maker, which was Nasdaq's most actively traded issue, touched a fresh year low of $35-5/16 for a decline of more than 14 percent after Merrill Lynch cut its investment rating, blaming a slowdown in technology spending.
Investors' mood darkened further after a batch of warnings about disappointing profits from a number of companies overnight or early in the day, including Dow component International Paper Co. (NYSE: IP), which edged down $1-5/8 to $37-7/8 on the Big Board.
Investors parked their money in defensive utilities and pharmaceutical stocks, which are among the year's good performers. The Pharmaceutical index was up 1.04 percent and the Dow Jones Utility Average rose 1.50 percent -- both near their year highs.
((--Wall Street Desk, (212) 859-1881) |
