Market Update: Stocks Take a Vicious Beating; Dow Loses Over 400 Points, Nasdaq Drops Over 6%

(Updated from 3:48 p.m. EST)

DANGER: Watch out for falling stocks.

For the first time in more than two years, the Nasdaq Composite Index closed below 2000. It's now down more than 60% from its March 10, 2000, record of 5048. In this month alone, the technology-laden index is off more than 9% as an onslaught of profit warnings have smashed its components to pieces.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 436.37 -4.10% 10,208.25 -5.4% S&P 500 53.11 -4.31% 1180.31 -10.6% Nasdaq 128.28 -6.25% 1924.50 -22.1% Russell 2000 15.01 -3.17% 458.64 -5.1% TSC Internet 16.97 -6.81% 232.23 -22.8% NOTE CHANGE PRICE YIELD 10-Year Treasury 8/32 100 23/32 4.919% Market data as of: 4:10 p.m. EST, Mar. 12, 2001

The Dow Jones Industrial Average has been down more than 200 points for most of the day; and losses widened to over 430 points. Honeywell (HON), Microsoft (MSFT) and Boeing (BA) were among the biggest losers on the index.

All Dow stocks ended below the flatline.

The broader S&P 500 Index dropped below 1200, a level that had been thought to be a bottom for that measure. The S&P 500 is now down more than 20% from its all-time high and is considered to be in bear-market territory.

According to Sam Ginzburg, senior managing director of equity trading at Gruntal, trading this afternoon is extremely choppy. "We're looking for five-minute bottoms," he observed. "But any hedge fund buyers have been met by big gorilla sellers, who are squashing out hopes of an intraday rally."

Today's losses in the U.S. come as Japanese stocks plunged to their weakest level since 1985. The yen fell to a 20-month low against the dollar today amid concerns the Japanese government will be unable to restore health to the country's sick economy. Adding to the weakness in the market, Prime Minister Yoshiro Mori, who is widely blamed for the country's economic weakness, refused to resign as he was scheduled to do this weekend.

To be sure, the recent bad-news blitz is to blame for today's selloff. "The current river of negative preannouncements for the first quarter of 2001 (459, compared with only 74 at this time last year), puts us on pace to match or exceed the dismal fourth-quarter 2000 season," Joseph Kalinowski, equity strategist with earnings tracker First Call/Thomson Financial, wrote in a report this morning.

Cisco Systems (CSCO) had another loser day, down 8.8% to $18.81. On Friday, the networking giant set plans to cut its workforce by as much as 15%. This morning, Credit Suisse First Boston lowered its 2001 earnings per share estimate for the stock to 53 cents per share from 60 cents per share. Cisco has been on a steady slide the past several months and is well off its 52-week high of $82. The networker is a bellwether tech stock, so its movement is closely watched. TheStreet.com spoke to Michael Cristinziano, senior vice president of equity research at Gerard Klauer Mattison about where Cisco goes from here.

Cisco's news helped drive the American Stock Exchange Networking Index down 7.7%. Juniper Networks (JNPR) decreased 9.4% to $49.69, JDS Uniphase (JDSU) slid 12% to $22.88 and Ciena (CIEN) declined 18.1% to $53.31. The list of stocks hitting new lows on the Nasdaq is filled with names like JDSU, Cisco and a host of other former highflying names.

On the heels of Intel's (INTC) high-profile profit warning last week, General Semiconductor (SEM) said this morning that it expects first-quarter revenue to fall 14% to 16% below fourth-quarter levels. The stock ended down 2.6% to $9.40.

Also warning, Silicon Storage Technology (SSTI) lowered its fiscal first-quarter 2001 earnings and revenue projections, blaming the slumping economy and inventory corrections. Silicon Storage slipped 11.3% to $9.31.

The companies join a slew of other chipmakers that have warned recently, including Altera (ALTR), Xilinx (XLNX) and National Semiconductor (NSM).

The Philadelphia Stock Exchange Semiconductor Index briefly turned up earlier this afternoon, but it ended in the dumper with everyone else.

Swedish phone maker Ericsson (ERICY) was getting slammed after it cautioned that it would take a first-quarter loss rather than break even, as it had previously forecast. The company said total sales would be flat or lower compared with the year-ago quarter. Ericsson had previously expected a 15% net increase. It was off 25% to $6.28. This sector has been hit by slowing sales of cellular handsets. Shares of Nokia (NOK) shed 6.5% to $21.30 and Motorola (MOT) slid 2.6% to $15.20.

This morning, Ed Kerschner, chief global strategist at UBS Warburg, lowered his earnings-per-share estimates for this year's S&P 500 to $54.50 from $56.50. "With the U.S. economy hitting the proverbial brick wall over the past few months, earnings are weaker than we expected," Kerschner wrote in a research note. "Earnings are currently holding up fairly well in non-cyclical areas, but they are plunging in technology, commodities and consumer cyclicals."

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