Stocks Fall on Intel Warning, Jobs Report
Friday March 9, 10:34 am Eastern Time
By Elizabeth Lazarowitz
<<NEW YORK (Reuters) - Stocks slumped in morning trading on Friday, battered by bad news from computer chip giant Intel Corp. (NasdaqNM:INTC - news) and a key monthly jobs report that dampened hopes for aggressive Federal Reserve interest-rate cuts.
The closely-watched U.S. employment figures, which showed the labor market held up in February in the face of a weakening economy, clouded the outlook for future Fed rate cuts.
That news shook a market already off-balance after Intel added its voice to the chorus of companies warning that the slower U.S. economy will dent their results.
``Tech stocks have been hit hard, and the market is reacting to the Intel sales forecasts,'' said John Davidson, chief investment officer at Circle Trust Co., which has $8 billion under management. ``There is sort of a feeling ... of, 'When is it going to end?'.''
The technology-heavy Nasdaq Composite Index (.IXIC) tumbled 93.92 points, or 4.33 percent, to 2,074.81. The Nasdaq fell as low as 2,068.58, an intraday low unseen since mid-December 1998.
The selling bled over into the broader market, and the Dow plunged 169.17 points, or 1.56 percent, to 10,689.08, wiping about Thursday's big gain of nearly 129 points. The broader Standard & Poor's 500 Index (.SPX) was down 24.46 points, or 1.93 percent, at 1,240.28.
Late Thursday, Intel, the world's No. 1 semiconductor maker, said its first-quarter revenues would slump as much as 25 percent from the prior quarter as the economic slowdown that is dampening demand for personal computers spread to networking, communications and server components. The company also said it would reduce staff by 5,000 people over the next 9 months.
Intel dropped $3-7/16 to $29-13/16, taking much of the computer chip sector with it. The Philadelphia Stock Exchange (.SOXX) fell 5.30 percent.
Computer-related shares like International Business Machines (NYSE:IBM - news), down $3.47 to $103.00, were also pummeled.
``Obviously, the market is still suffering from future earnings, and that will continue to be the case in the short term until we get a better picture of where the economy stands,'' said Peter Cardillo, director of research at Westfalia Investments.
The mood on Wall Street darkened after data showed payrolls grew by 135,000 in February, well surpassing expectations for a gain of 62,000, after rising 224,000 in January. Unemployment remained steady at 4.2 percent, as anticipated.
Average hourly earnings -- watched as a measure of wage inflation -- jumped 0.5 percent, above analysts' forecasts for a 0.3 percent gain, fueling concern over wage-led inflation.
The report lowered the odds of a big 0.75 basis point cut at the Fed's next policy-setting on March 20, although expectations for a 0.50 basis point trimming remained intact.
``In the short term, this will lessen the need for aggressive rate cuts by the Fed,'' said Art Hogan, chief market analyst at Jefferies & Co. ``In the early going this will have a negative effect on equities markets.''>> |
