Backing Away From the Table
By Ari Weinberg
Perhaps hounded by a sense that they were getting ahead of themselves, investors are taking some chips off the table.
A spreading sense that stocks are overbought, and another weekly jobs report showing more unemployment claims than expected, were taking their toll on Thursday morning. After closing Wednesday at 2260.6, the Nasdaq was perched far above its April 4 low of 1638.8 and was ripe for a fall.
"We had market pros buying very large positions. It started to look very overbought," says Jeff Saut, chief strategist at Raymond James. With tech market leaders JDS Uniphase up 73 percent and Cisco Systems up 46 percent since April 4, Saut said he was expecting a pullback.
As of 12:15 p.m. EDT, the Nasdaq Composite was down 60.34 points, or 2.72 percent, to 2160.26. The Dow Jones Industrial Average was off 111.59 points, or 1.03 percent, to 10765.09 with only Philip Morris up on the day. The S&P 500 was down 20.18 points, or 1.59 percent, to 1246.26. The Industry Standard 100 lost 14.46 points, or 3.09 percent, to 454.25 on weakness across
the board.
Besides general concerns about valuation, higher-than-expected unemployment claims for last week also put a drag on the markets. The Department of Labor said this morning that initial unemployment claims rose to 421,000 last week - the highest level in just over five years. The four-week moving average rose to 404,500 - the highest since late 1992. The rising claims over the past few weeks should help prepare the market for Friday's April employment report, which is expected to be higher than March's 4.3 percent reading.
Fresh data on the services sector also pointed to more weakness. The National Association of Purchasing Management's non-manufacturing survey for April came in at 47.1; a reading below 50 percent denotes contraction in the sector. New orders, inventory and employment dropped, though prices were stable.
Very few stocks have been protected from Thursday's selling. Among them are silicon memory product maker Rambus. The stock was up $2.17, or 13.23 percent, to $18.57. Rambus's stock price had gone south as it appeared to be on the losing end of a patent infringement battle with Infineon Technologies. Also up was business-to-business software maker i2 Technologies. Its stock was up $1.50, or 7.5 percent, to $21.53.
Pulling back after a good two-day run are two former Internet high flyers. Online discount airfare retailer Priceline.com was down 79 cents, or 11.4 percent, to $6.17. Net incubator CMGI was down 16 cents, or 2.75 percent, to $5.66, though still up from a recent low of $1.75.
"A lot of people were intrigued by [Net stocks'] valuations the past few days. You've got to look at them on a case-by-case basis," said Steve Appledorn, a portfolio manager for the Munder Funds. "Some of these companies are exceeding forecasts, and stock holders are no longer fighting all those people who had no idea about valuing the companies," said Appledorn.
Web-design software maker Macromedia was down $5.58, or 21 percent, to $21. On Wednesday the company reported fourth-quarter earnings that came in below expectations. Macromedia was unable to offer guidance for the current year. The company should see several difficult quarters ahead as it digests the products of recently purchased Allaire, according to Robertson Stephens analyst Lowell Singer in a research note.
For the most part, the selloff has been wide but not too deep for major stocks. On the Big Board, Lucent Technologies was off 40 cents, or 3.55 percent, to $10.87; EMC was down $2.35, or 5.34 percent, to $41.65; Corning was off $1.70, or 6.8 percent, to $23.30.
Cisco System was down 75 cents, or 3.75 percent, to $19.25. JDS Uniphase was down $1.46, or 6.12 percent, to $22.39. Microsoft, which seems to have reached a comfort level, was down just 24 cents, or 0.34 percent, to $69.52.
Handheld makers Palm and Handspring were significantly lower. Palm lost $1.12, or 11.5 percent, to $8.63. Handspring was down $2.34, or 13.37 percent, to $15.16 on a downgrade by Lehman Brothers.
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