Market Update: Dow Loses 1%, Nasdaq Slips 2.2% on Odd Trading Day
(Updated from 4:18 p.m.)
The
Dow Jones Industrial Average fell sharply when the
New York Stock Exchange resumed trading around 11:35 a.m. EDT, infected by worries about tech earnings and jitters after a technical glitch led the Big Board
to halt trading for more than an hour this morning.
The Dow ended the "regular" trading day off by more than 113 points, or 1%, to 10,977 -- having again sunk below the key 11,000 threshold. The
blue-chip index has flip-flopped around 11,000 several times in the past month. The
Nasdaq Composite Index closed down by about 49 points, or 2.2%, 2215, and the
S&P 500 index closed down by 12 points, or 0.9%, to 1265.
Trading was officially halted in all NYSE stocks at 10:10 a.m. EDT this morning and not started again until 11:35 a.m. By 2 p.m., most all stocks were trading again.
Tech stocks and so-called Old Economy names were weaker across the board, except for the most defensive sector -- gold. The
Philadelphia Stock Exchange Gold & Silver Index
gained 4%. Dot-coms, retailers, cyclical companies and transports were lower.
Trouble at the NYSE began almost immediately after the opening bell, and many of the Dow's 30 components didn't open for trading at all until the NYSE had resumed activity. Some NYSE stocks traded on electronic exchanges while the Big Board was closed, but trading volume across the board was spare -- and slow to pick up after the exchange reopened. Volume on the Nasdaq was low in sympathy, for example, and the
Chicago Stock Exchange
didn't trade NYSE-listed stocks for part of the morning.
Pop Goes the Enthusiasm
Tech bulls were down and out today despite an upbeat midquarter update from
Intel
(INTC) - Get Report
last night: Their spirits had been high in after-hours trading last night and early this morning before
Juniper Networks'
(JNPR) - Get Report
warning and
Goldman Sachs'
negative research note on chipmakers came out and dampened Wall Street's spirits.
In Intel's long-awaited midquarter earnings update after the close yesterday, the chip king
reaffirmed its revenue targets for the second quarter. The company was upbeat about the PC sector and said it expects overall business to improve in the second half of this year.
But the chip sector was weak after
Goldman Sachs
this morning lowered its fiscal 2001 and 2002 earnings forecasts on Intel,
National Semiconductor
(NSM)
and
Lattice Semiconductor
(LSCC) - Get Report
. National Semi cut its earning guidance yesterday during the trading session and Lattice Semiconductor dropped its earnings forecasts after the close yesterday. Intel closed off by 1.5% to $30.67; Juniper lost 18.5% to $38.02; and National Semiconductor was off by 6.2% to $29.13. The
Philadelphia Stock Exchange Semiconductor Index
, which tracks the chip sector, was 3.1% lower.
The networkers were also taking their lumps after Juniper said its second-quarter revenue would come in
significantly lower than expected -- around $200 million to $210 million instead of its previous guidance of $300 million to $330 million. Juniper ended the day down by 18.5% to $38.02. Juniper's biggest rival
Cisco
(CSCO) - Get Report
fell 6.1% to $20.49,
Nortel
(NT)
lost 4.6% to $12.53,
Lucent
(LU)
lost 0.9% to $8.40 and
JDS Uniphase
(JDSU)
closed down by 5.9% to $16.05.
These days, the market tends to turn on a dime. "We're in a trader's market," said Fred Maudsley, managing director of trading at
Gruntal
, who suggested that yesterday's rally ahead of the Intel update was driven by momentum rather than fundamentals. Maudsley said he expects stocks to continue to move on individual news bits, but remain
range-bound in the near-term. "We've been in a trading range for some time, and I think we're going to stay there."
Earnings warnings from tech companies sprouted like weeds overnight.
TranSwitch Semiconductor
(TXCC)
said last night that it expects to post a second-quarter loss instead of the previously expected profit; networking company
3Com
(COMS)
dropped its targets for fourth-quarter revenue; handheld-device maker
Handspring
(HAND)
cut its fourth-quarter revenue forecast; and Lattice Semiconductor gave its revised outlook. All traded lower today -- TranSwitch was off the most; it lost 16.6% to $12.40.
Listen Up
It is the second-quarter earnings confession season, after all.
During confession season, companies "preannounce," or let the market know if they expect to miss performance targets. So far this confession season, earnings news from the heavy-hitters has been mostly negative.
Sun Microsystems
(SUNW) - Get Report
last week warned that it would miss second-quarter targets. PC maker
Hewlett-Packard
(HWP)
Wednesday
cautioned that a global slowdown in information technology could hurt its revenue. Financial powerhouse
J.P. Morgan Chase
(JPM) - Get Report
said it expects revenues in the remaining quarters of this year to be lower than its first-quarter results because of poor market conditions. And
Broadcom
(BRCM)
said its revenue
would fall short of expectations in the second quarter.
But there have also been some encouraging words from companies other than Intel, such as those from chipmaker
Xilinx
(XLNX) - Get Report
. The company, however, closed down 6% to $46.41.
In April, investors pumped up stocks significantly as they bet that corporate earnings would improve in the third quarter. But now a consensus seems to be forming that a recovery won't happen until the fourth quarter of this year or early next year. The
Federal Reserve has cut interest rates five times this year in a bid to get a sluggish economy back on its feet.
The major stock market indices have been trading in a range since early May. They had gained a bit of traction over the past week, but volume was thin ahead of Intel's report. As of today's close, the Dow is now up 16.9% from its March 22 low of 9389.48, while the Nasdaq is ahead 35% from its recent low on April 4 of 1638.8.
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