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Tech Stocks Plummet Anew

Robert Holmes

The Dow Jones Industrial Average closed below 13,000 and tech stocks were punished yet again as Wall Street fell victim to late selling pressure Monday.

Earlier, gains in banks, retailers and transports offset weakness in oil and gas names to send blue-chips higher, but the upward momentum faded in the final hour.

At the close, the Dow had a loss of 55.44 points, or 0.43%, to 12,987.30 -- the first time the index has closed below the 13,000 level since mid-August. The S&P 500 fell 14.52 points, or 1%, to 1439.18.

In what has been a trend of late, the tech-heavy Nasdaq Composite saw the steepest declines. This time, the index was lower by 43.81 points, or 1.67%, at 2584.13.

Pressuring the Nasdaq were losses in Nvidia (NVDA Quote - Cramer on NVDA - Stock Picks) and Research In Motion (RIMM Quote - Cramer on RIMM - Stock Picks) of 10% and 9.4%, respectively.

Also on the losing side, the Philadelphia Gold and Silver Sector Index dropped 7.7%, and the Philadelphia Oil Service Sector Index sank 5.9%. Those moves came as crude slid $1.70 to $94.62 a barrel, gold tumbled $27 to $807.70 an ounce and silver slid 78 cents to $14.76 an ounce.

The strongest subgroup measure was the Amex Airline Index, which jumped 4.7%. Elsewhere, the KBW Bank Index climbed 1.1%, and the S&P Retail Index rose 1%.

"It was a thinly traded day, and even though we finished lower, it wasn't really disastrous," said Larry Wachtel, senior market analyst with Wachovia Securities.

"There was really a dichotomy with the losers of the last few weeks performing well today and vice versa," he added. "This wasn't a full-blown selloff like Friday, and given the fact it was a quasi-holiday, you can't read much into today. People are still tentative, though."

The major averages entered the day having notched a second losing week in a row, culminated by a sharp decline in the final hour of trading Friday. Over the five sessions last week, the Dow lost 4%, and the S&P was down 3.8%. The Nasdaq suffered the most, tumbling more than 6.5%.

Breadth was weak to start the week. On the New York Stock Exchange 3.75 billion shares changed hands, as decliners toppled advancers by a 2-to-1 margin. Volume on the Nasdaq reached 2.73 billion shares, with losers beating winners 3 to 2.

Paul Nolte, director of investments with Hinsdale Associates, said that the market is due for a bounce, as market internals are near levels that usually jump-start a short-term rally.

"Either the market is setting up for a successful retest of the August lows or it will be a dismal failure and we begin a journey into a new bear market," Nolte said. "However, unlike past instances of buying the dips, we are getting to the point of selling rallies as many of our longer-term models point to generally lower stock prices ahead."

Financial stocks, which were battered in the wake of more writedowns due to the recent credit market woes, got some positive news to start the week. The New York Times reported that a structure for a $75 billion backstop fund from Citigroup (C Quote - Cramer on C - Stock Picks), Bank of America (BAC Quote - Cramer on BAC - Stock Picks) and JPMorgan (JPM Quote - Cramer on JPM - Stock Picks) has been struck.

The same news outlet has also reported that potential bids for restaurant chain Wendy's (WEN Quote - Cramer on WEN - Stock Picks) could be in jeopardy due to the credit crunch. Still, Wendy's closed higher by 36 cents, or 1.2%, at $31.60.

The earnings docket was light to open the week, with Tyson Foods (TSN Quote - Cramer on TSN - Stock Picks) the only S&P 500 company on tap. Tyson swung to a fiscal fourth-quarter profit of 9 cents a share, compared with a loss of 17 cents a year ago. However, both earnings and guidance fell short of Wall Street's estimates, and shares fell 42 cents, or 2.9%, to end at $14.33.

Several brokers were out with ratings changes. Lehman Brothers downgraded both Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks) and Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) to equal-weight from overweight. Fannie Mae lost 4% to $47.06, and Freddie Mac slumped 4.1% to close at $40.

Shares of E*Trade (ETFC Quote - Cramer on ETFC - Stock Picks) spiraled 58.7% lower after Citigroup downgraded the financial company's stock to sell from hold. The firm cited E*Trade's announcement after the previous session of larger-than-expected writedowns.

Merrill Lynch downgraded many of the enterprise software names. Among those, the firm cut its rating for Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) to neutral from buy. Oracle (ORCL Quote - Cramer on ORCL - Stock Picks), Red Hat (RHT Quote - Cramer on RHT - Stock Picks) and Sybase (SY Quote - Cramer on SY - Stock Picks) were also cut.

Among upgrades, Citigroup raised its rating for chipmaker Altera (ALTR Quote - Cramer on ALTR - Stock Picks) to buy from hold. However, the stock was off 4 cents, or 0.2%, to $18.88.

The U.S. bond market was closed in observance of the Veterans Day holiday. Additionally, there were no economic releases scheduled.

Overseas markets were mostly lower. In Asia, Hong Kong's Hang Seng dropped 3.9% and Japan's Nikkei 225 declined 2.5%. Among European bourses, London's FTSE 100 added 0.5%, while Germany's Xetra Dax slipped 0.1%.

Action should pick up Tuesday, with a report on pending home sales, as well as earnings from retailers Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks), Home Depot (HD Quote - Cramer on HD - Stock Picks), and TJX (TJX Quote - Cramer on TJX - Stock Picks), due before the opening bell.