U.S. Stocks Decline, Driving Nasdaq to Seventh-Largest Loss
from Bloomberg
By Chelsea Emery
New York, Jan. 2 (Bloomberg) -- U.S. stocks declined, driving the Nasdaq Composite Index to its seventh-biggest loss, as last year's plunge in computer-related shares extended into 2001.
EMC Corp., Network Appliance Inc. and other data-storage stocks dropped after a Robertson Stephens Inc. analyst said the companies' profits may disappoint investors because businesses are cutting back purchases of new computer equipment and software.
The declines in EMC and Network Appliance, which gained last year even as the Nasdaq had its biggest-ever annual loss, show that investors expect the slowdown in profits to extend to industries that had been seen as havens.
``What we saw last year is continuing,'' said Alan Loewenstein, who helps manage the John Hancock Technology Fund. ``I'd hoped that selling would dissipate, but obviously today the sellers are in command.'' The Robertson Stephens comments, he said, hurt ``the last area in tech that had been doing well.''
The Nasdaq fell 178.66, or 7.2 percent, to 2291.86, the seventh-largest loss in its 29-year history and lowest close since March 3, 1999. The Nasdaq slid 39 percent last year, including 33 percent in the fourth quarter.
The Standard & Poor's 500 Index lost 37.01, or 2.8 percent, to 1283.27, led by General Electric Co. The Dow Jones Industrial Average slipped 140.70, or 1.3 percent, to 10,646.15.
More than five stocks fell for every four that rose on the New York Stock Exchange. Almost 1 billion shares traded on the Big Board, 3.9 percent below the three-month daily average.
Stocks were also pulled lower by a report that showed manufacturing fell to its lowest level in 10 years in December, while prices for raw materials rose.
`Throwing in the Towel'
The National Association of Purchasing Management ``number has investors very concerned the economy's weakening quicker than they thought and will slip into recession,'' said Adam Friedman, who helps manage more than $1 billion in value stocks at National City Investment Management Co. in Cleveland. ``People are just throwing in the towel.''
EMC dropped $12.19, or 18 percent, to $54.31 after Robertson Stephens analyst Dane Lewis lowered ratings on EMC, Network Appliance and 10 other data-networking and security stocks: Veritas Software Corp., VeriSign Inc., Cacheflow Inc., Quest Software Inc., Network Engines Inc., Inktomi Corp., NetIQ Corp., Netegrity Inc., Certicom Corp. and Internet Security Systems Inc.
Network Appliance sank $12.75, or 20 percent, to $51.44 and Veritas slumped $21.50, or 25 percent, to $66.
EMC rose 22 percent in 2000, while Network Appliance advanced 55 percent. Before today's decline EMC still sold for 65 times this year's expected profit as investors bet the need for data storage would be so great that companies would buy equipment and software even as they cut back on other computer spending.
Now, Lewis said, he doesn't expect the stocks to be a haven. ``The impact of this spending slowdown will be dramatic enough to impact even storage and security vendors that we previously viewed as relatively immune,'' Lewis said in a note to clients.
GE Falls
GE fell $4.19 to $43.75. Further slowing in the economy is likely to hurt companies such as GE, which sells products from aircraft engines to electric power equipment, analysts said. In addition, GE and U.S. safety officials have started investigations after several reports of GE airline engine breakups, the Wall Street Journal reported.
Boeing Co. sank $4 to $62. First Union Securities analyst Sam Pearlstein said the company may see a 30 percent decline in jetliner orders this year because airlines are facing higher fuel bills and labor costs. He cut the stock to ``buy'' from ``strong buy.''
Securities firms fell as investors bet declining stock prices will hurt their business. Morgan Stanley Dean Witter & Co. lost $7.13 to $72.13 and Goldman Sachs Group Inc. dropped $6.69 to $100.25, leading the Amex Securities Broker/Dealer Index to a 4.3 percent decline.
Walgreen Drops
Walgreen Co. fell $1 to $40.81 and Safeway Inc. lost $2.06 to $60.44 after Goldman, Sachs & Co. analyst John Heinbockel said investors should sell shares of the drug and food retailers. The stocks aren't cheap after last year's surge, he said. Walgreen rose 38 percent last year while Safeway jumped 70 percent.
The stocks are likely to fall in the first quarter because much of the gain late in 2000 was driven by ``temporary portfolio repositioning,'' not improvements in the companies' business, he said.
Some of the biggest computer-related and telephone shares rallied.
Intel Corp. rose $1 to $31.06 and WorldCom Inc. advanced $1.88 to $15.94.
Intel, the largest chipmaker, said it will show off two wireless computing systems at a trade show this week and introduced a digital-audio player.
Shares of WorldCom, the No. 2 long-distance phone company, are ``dirt cheap,'' Salomon Smith Barney Inc. analyst Jack Grubman said in a note to clients. Shares are likely to double if the company reaches the high end of its 12 percent-to-15 percent revenue growth target before the end of the year, Grubman wrote.
AT&T Rises
AT&T Corp., the No. 1 U.S. long-distance phone company, rose $1 to $18.25. The company said its broadband division would raise cable prices by an average of 4.8 percent. The company also said it completed a new $25 billion credit line.
Oil stocks rose as crude-oil futures gained after Saudi Arabia said last week it supports a production cut by the Organization of Petroleum Exporting Countries to bolster prices.
Chevron Corp. climbed $1.50 to $85.94, USX-Marathon Group gained 19 cents to $27.94 and Conoco Inc.'s B shares rose 44 cents to $29.38.
IBP Inc. advanced $1.25 to $28. Tyson Foods Inc. said it agreed to buy the largest U.S. beef processor for $4.7 billion in cash, stock and assumed debt. Tyson, the biggest U.S. poultry producer, will pay $30 for each IBP share, about half in cash and half in stock. That's 12 percent more than IBP's closing price Friday.
Tyson dropped 94 cents to $11.81.
Analog Devices Falls
Analog Devices Inc. lost $4.19 to $47 after Morgan Stanley Dean Witter & Co. analyst Louis Gerhardy said demand for the company's high-speed communications chips is weakening and downgraded the maker of high-speed communications chips to ``neutral'' from ``outperform.''
Brocade Communications Systems Inc. sank $16.31 to $75.50. Investors are wondering if the maker of computer-networking switches' rapid expansion can continue, after some big customers said earnings will miss estimates, Barron's said.
Adaptive Broadband Corp. fell $3.19 to $2.94. The maker of wireless telecommunications equipment said fiscal second-quarter sales were about 75 percent below expectations. The company, which is expected to report earnings on January 25, said it expects $8 million in sales versus its forecast of about $31 million, mostly because of the deferral of shipments to one customer.
Carrier Access Corp. fell $2.88 to $6.13. The maker of equipment for high-speed wireless Internet connections said it will post a loss in the fourth quarter, excluding charges, after two of its customers canceled millions of dollars in purchases.
Analysts expected Carrier Access to earn 16 cents a share.
Brinker Drops
Brinker International Inc. dropped $6.31 to $35.94 after Lehman Brothers Inc. and Bear, Stearns & Co. analysts said earnings or sales growth at the restaurant operator was likely to slow because of the slowing economy.
Lehman's Mitchell Speiser lowered the stock to ``neutral'' from ``buy'' and said earnings growth may slow because of bad weather and concerns about a slowing economy. Bear Stearns' Joseph Buckley dropped his rating to ``attractive'' from ``buy.''
WebMD Corp. slipped 31 cents to $7.63. The Internet-based health information service said it will take a $275 million charge in the fourth quarter to end two ventures with Rupert Murdoch's News Corp. News Corp.'s American depositary receipts, each representing four ordinary shares, were unchanged at $32.25.
Best Regards, J.T. |
