Nasdaq Slide Stopped
Friday Market Roundup
By Aaron L. Task
The Street.com
N E W Y O R K, Feb. 5 —
Stocks were up early, then down
hard, and investors spent most of the
session trying to get the (bullish)
feeling again. Blue-chips made it through the
rain under the cover of resurgent commodity
names, while technology stocks got drenched
again. Still, there were some signs the worst of
the storm has passed.
Flood waters continue to rise in the bond market,
however, which fell again after the Labor Department
reported non-farm payrolls grew by 245,000 in January,
significantly exceeding expectations for a rise of 135,000.
The unemployment rate was unchanged at 4.3 percent, a
28-year low. The price of the 30-year Treasury bond fell
26/32, to 98 18/32, its yield rising ever higher to 5.34
percent.
The Nasdaq Composite Index fell as low as 2346.82
at midday and losses in big-cap tech names were no
doubt giving some investors heart palpitations. But losses
moderated in the afternoon for most bellwethers and the
index closed down "just" 36.45, or 1.5 percent, to
2373.62.
Still, it was hardly a day of celebration in tech-land as
nearly all tech standards faltered in both over-the-counter
and listed trading. The Morgan Stanley High-Tech 35
slid 2.7 percent and the Nasdaq 100 shed 1.9 percent.
Chip and equipment makers were battered again by
worries about price gouging and a profit warning from
Advanced Micro Devices, which fell 11.2 percent.
Elsewhere in the group, Intel slid 1.9 percent, Micron
Technology lost 7.1 percent and Novellus Systems
declined 3 percent. The Philadelphia Stock Exchange
Semiconductor Index lost 2.8 percent.
Elsewhere, Electronic Data Systemsslid 7.5 percent
after reporting fourth-quarter earnings down 50 percent
from a year ago. The results were in line with expectations
and Lehman Brothers upgraded its recommendation,
but investors were unimpressed. Additionally, Sterling
Commerce tumbled 23.4 percent and SCI Systems lost
17.3 percent after each posted disappointing earnings.
Internet stocks also struggled despite reports General
Electric's NBC is considering buying a large stake in
Lycos and rumblings about other similar combinations.
TheStreet.com Internet Sector fell 5.93, or 1.1
percent, to 532.52.
Not everyone was scared off by the action, however.
"The pros are so focused on what's happening right
now they turn bullish at the top and bearish at the bottom.
I am buying today, to put it mildly," said Brian Gilmartin,
portfolio manager at Trinity Asset Management in
Chicago. "I think what's going on is very natural. This
happens every six or eight months: There's nothing for
people to pin their hopes on, no fresh tech news to drive
valuations higher."
Gilmartin said the tech sector could struggle until the
next major event, the earnings report by Dell on Feb. 16,
which is Trinity's largest holding. "Depending on what
Michael Dell says in the conference call we might see
another leg up at the end of the quarter," he said. "I am
buying here in anticipation of what happens at end of
February and early March."
The fund manager is more concerned about the second
half of the year, however, given reports "so much business
is being pulled into the first quarter because of Y2K," he
said.
Today, Gilmartin was buying both Micron and Applied
Materials, believing the "downturn in memory chips that's
been going on really since 1995 is almost over. The stock
prices have incorporated a lot of that but the next leg up is
going to be much longer. When I can get 'em at prices like
today, I'll buy 'em."
The fund manager was undeterred by concerns about
the impact rising interest rates are having on tech
valuations. "We're going to have the largest budget surplus
in history - interest rates are not going up for a long period
of time," he said. "Valuations on tech stocks are going to
continue to be compelling."
Commodities Rise from the Dead
Meanwhile, blue-chip proxies sustained relatively modest
declines, thanks to another strong performance by
heretofore unpopular groups such as energy, paper,
chemicals and utilities.
The Dow Jones Industrial Average closed down
0.26 to 9304.24, well up from its nadir of 9247.34 thanks
largely to strength in Alcoa, AlliedSignal and Chevron.
The S&P 500 slid 9.09, or 0.7 percent, to 1239.40 but
off its low of 1232.33, supported largely by energy stocks
such as Anadarko Petroleum and Texaco, which was
upgraded by Schroder. The American Stock Exchange
Oil Index rose 3.1 percent
The Russell 2000 lost 5.07, or 1.2 percent, to
412.72.
"I have felt all week this was just part of the
nervousness that's gone on because of the bond market
and what's going on around the world," said Ned Collins,
executive vice president of U.S. stocks at Daiwa
Securities America. "Unfortunately the media is always
looking for some underlying reason to cause this huge
move and maybe it's just normal rotation, correction or
consolidation."
Collins said he's not terribly worried about the
downturn in technology stocks, either. "IBM, Motorola
and AT&T are all under pressure, but they've also had
great moves," he said. "I don't know if it's anything to be
all concerned about."
Moveover, the Dow's ability to hold above 9275 could
be a key technical victory, the trader observed. "One area
for concern is the lousy advance/decline, therefore maybe
we haven't seen the end of it yet. But I think we may be
okay here. I still think it's a liquidity driven market and the
Fed has indicated they're going to be friendly."
In New York Stock Exchange action, 872.3 million
shares traded while declining stocks led advancers 1,775
to 1,158. In Nasdaq Stock Market activity, losers led
2,445 to 1,600 on 1.016 billion shares. New 52-week
lows led new highs 61 to 24 on the Big Board and by 73
to 42 in over-the-counter trading, the first time new lows
have exceeded news highs in OTC action since Dec. 17.
Among other indices, the Dow Jones Transportation
Average rose 0.52 to 3247.66; the Dow Jones Utility
Average gained 2.31, or 0.8 percent, to 293.60; and the
American Stock Exchange Composite Index fell 0.86,
or 0.1 percent, to 706.26.
For the week, the Dow industrials fell 54.59, or 0.6
percent; the S&P 500 shed 40.24, or 3.1 percent; the
Nasdaq Comp dipped 132.58, or 5.3 percent; the Russell
2000 slid 14.49, or 3.4 percent; TheStreet.com Internet
index lost 25, or 4.5 percent; the Dow transports lost
45.16, or 1.4 percent; the Dow utilities shed 9.20, or 3
percent; and the Amex Composite fell 8.60, or 1.2
percent.
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