Market Update: Biotechs Join Tech Losers for Lunch
Stocks opened mixed this morning, with investors shedding tech stocks in favor of blue-chips following a dour analyst note on EMC (EMC) and Sun Microsystems (SUNW). But volume was very subdued, with plenty of trading desks still empty after the long holiday weekend.
The Nasdaq was lately losing about 52 points, or 2.3%, while the blue-chip Dow was rising just 20 points, or 0.2%. Traditional defensive sectors like tobacco, drug stocks, energy and paper were up, while chip stocks and brokerages were the weakest sectors today. Investors pulling cash from tech stocks often rotate their money into defensive areas, as these sectors tend to be more immune to downshifts in economic growth than technology."
"It's going to be quiet today," said Michael Driscoll, director of listed trading at Credit Suisse First Boston. "Plenty of people are still away the day after a three-day weekend. I don't think we're going much lower today."
Goldman Sachs this morning dropped its earnings estimates on data-storage king EMC and computer-hardware company Sun Microsystems, saying it expects the two to have "trouble meeting forecasts" due to U.S. economic weakness, slowing in Europe and Asia and "fierce pricing." Goldman's note comes just ahead of second-quarter confession season, when companies warn investors if they expect to miss performance targets. Sun was lately off 8.7% to $18.70 -- and the second most-actively traded stocks on the Nasdaq. EMC was shedding 7.6% to $34.30.Following the Goldman note, EMC said this morning that it plans to cut 1,100 jobs, or 4% of its workforce, in an effort to reach its 2001 revenue growth targets of 20% or more. The job cuts will be implemented over the next several weeks. Earlier one of the few tech stocks on the rise, telecom-equipment maker Nortel (NT) was lately falling. It was boosted earlier after Lehman Brothers raised its 12-month price target on the company to $20 from $17. Nortel lately was down 0.4% to $14.55. With first-quarter earnings season a done deal, and with the Federal Reserve's fifth interest-rate cut this year in the rearview mirror, confession season is the biggest event on the near-term horizon. Investors may worry that Goldman's note is a harbinger of what's to come when confession season gets started around the second week of June. Meanwhile, there is little to give rudder to the stock market. Last week, investors took profits on blue-chips and pushed tech stocks higher. For the week, the Dow Jones Industrial Average fell 2.6% and the S&P 500 shed 1.1%, while the Nasdaq Composite gained 2.4%. Biotech stocks were falling after market research house Prudential downgraded five sector names and upgraded one. Prudential, which today pared back the number of ratings it uses to three, downgraded Ista Pharmaceuticals (ISTA), ViroLogic (VLGC) and Corvas International (CVAS), among others, to hold from strong buy. Ista was falling 3.5%, ViroLogic was off 12% and Corvas was down 3.3%. The Nasdaq Biotechnology Index was still a bit up, though, higher by 0.3%. Shares of oil mammoth Conoco
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