High-Tech Is Brought Low as Selloff Continues

The Nasdaq Comp suffers its sixth-worst point decline as Internet stocks and others stay heavily pressured.
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yesterday was the day the music stopped in techland, today was the day somebody grabbed the piano player and punched him in the face.

Tech stocks were battered and Internet stocks deep-fried after an afternoon chance for redemption faltered. Blue-chips resisted the downward tug on the leadership group, but all major proxies ended with losses.

As stocks fell, the price of the 30-year Treasury bond rose 19/32 to 101 26/32, its yield falling to 5.13%.

The

Nasdaq Composite Index

tumbled from its record heights, falling as low as 2335.75 before closing off 70.72, or 2.9%, to 2344.77. That's the Nasdaq's sixth-largest point loss ever, although it's historically insignificant in percentage terms.

Most tech bellwethers were able to bounce from intraday lows, but the

Nasdaq 100

still lost 3.5% and the

Philadelphia Stock Exchange Semiconductor Index

shed 4.5%.

Big losses were sustained by tech leaders such as

Sun Microsystems

(SUNW) - Get Report

, which closed down 6.6% to 98 5/8 after falling as low as 96 7/16. Elsewhere,

Cisco

(CSCO) - Get Report

and

MCI WorldCom

(WCOM)

each lost over 4.5%, while

Novellus Systems

(NVLS)

shed 8.4%.

In

New York Stock Exchange

trading,

Lucent

(LU)

dipped 7.7% despite posting better-than-expected first-quarter earnings.

IBM

(IBM) - Get Report

was able to avoid the downturn, rising 1.3% following some positive comments at

Merrill Lynch

ahead of its earnings report. After the bell, Big Blue reported fourth-quarter profits of $2.47 a share; the 21-analyst estimate called for earnings of $2.45.

'The Nasdaq Comp is above its 200-day moving average by 28% to 30% -- that's the second-highest level ever,' said Everen's Greg Nie. 'The meat of that is big-cap tech stocks, and maybe they are stretched out.'

Losses for Internet names were more extreme than their traditional counterparts, as had been their recent gains.

TheStreet.com Internet Sector

index shed 26.06, or 5.1%, to 482.64 as

Yahoo!

(YHOO)

slid 7.9%,

Excite

(XCIT)

lost 11%, and

America Online

(AOL)

fell 5%.

A host of other Net names were similarly slammed, from

@Home

(ATHM) - Get Report

to

Xoom.com

(XMCM)

, which fell 22% after posting widening fourth-quarter losses

last night.

Bearish comments from heavyweights

Barton Biggs

, strategist at

Morgan Stanley Dean Witter

, and

Ralph Acampora

, chief technical analyst at

Prudential Securities

, only added to the already growing negativity surrounding the once impenetrable Internet stock bubble, traders said.

"The Internet stocks have possibly cracked enough where it will take time to repair the damage," said Bruce Bittles, market strategist at

J.C. Bradford

in Nashville, Tenn. "As for the rest -- the

Microsofts

(MSFT) - Get Report

and Lucents -- it's only the first day down. They had such a tremendous run you can't draw any conclusions there."

Tech bellwethers took some lumps today because "on Wednesday you had the best news you're probably going to have in a long, long time in earnings and the president saying he wants to put money in the stock market to save Social Security," Bittles surmised. "It doesn't get any better than that. So everybody did their buying early yesterday. The reaction today is pretty typical."

Dow Can't Hold Its Strength

In blue-chips, the

Dow Jones Industrial Average

spent most of the morning flip-flopping around break-even after reaching an initial high of 9377.50. Losses accelerated in the afternoon, taking the index to 9228.55 at its nadir. The Dow climbed within spitting distance of neutrality in the final hour, only to retreat and close down 71.83, or 0.8%, to 9264.08.

The

S&P 500

fell 21.46, or 1.7%, to 1235.16 while the

Russell 2000

slid 6.57, or 1.5%, to 424.05.

AT&T

(T) - Get Report

proved the biggest drag on the Dow. Ma Bell was seconded by

J.P. Morgan

(JPM) - Get Report

, which declined along with the majority of financial stocks as concerns about Brazil reemerged.

The

Philadelphia Stock Exchange/KBW Bank Index

dipped 1.4% while brokerages were harder hit after

Donaldson Lufkin & Jenrette

(DLJ)

posted a 32% decline in fourth-quarter profits. The

Philadelphia Stock Exchange Broker/Dealer Index

shed 4.4%.

In Brazil, the

Bovespa

lost 4.6% despite passage yesterday of a pension reform bill considered key to the national's fiscal austerity plan. Traders were apparently more focused on the continued weakness in the real. In New York,

Telebras Holdings

(TBH)

shed 11.9%.

Bittles questioned how great an effect the developments in Brazil are having on the broader trend. "It's a two-edged sword," he said. "It could cause trouble if there's a series of devaluations in South America, but it's keeping the

Fed

in a friendly mode.

Alan Greenspan

can't raise rates even with unemployment falling like a stone."

The strategist remains bullish, but foresees the market sticking in a trading range until mid-February with 9000 being "the risk" and 9700 the "reward."

Some Reasons for Optimism Amid the Slide

Similarly, Greg Nie, chief technical analyst at

Everen Securities

in Chicago, was not overly concerned about the market's performance.

"The Internet stocks have taken a good old fashioned thumping to the downside but to the market's credit that has not dragged down the entire market," Nie observed. "It's not had the influence I would have expected it to have or could have had. That speaks well for the intermediate bullish trend."

The relatively modest NYSE trading volume today also provides bulls some solace, Nie said.

"The volume issue is helping portray weakness as a short-term consideration," he said. "We might have to go through some churning, choppy consolidation for a handful of days, but so far the bigger volume days have been on the upside. That's a plus."

In NYSE trading, 871.8 million shares were exchanged while declining stocks whipped advancers 1,932 to 1,128. In

Nasdaq Stock Market

action 1.089 billion shares traded -- the 11th straight session with more than a billion shares -- while losers led 2,477 to 1,599. New 52-week highs bested new lows 52 to 51 on the Big Board and by 65 to 34 in over-the-counter trading.

Nie did express some caution about technology as a whole, however. "I think you should keep an eye out that maybe you get a crescendo in tech," the technician said. "You have to consider there are threats now. The Nasdaq Comp is above its 200-day moving average by 28% to 30% -- that's the second-highest level ever. The meat of that is big-cap tech stocks, and maybe they are stretched out."

Among other indices, the

Dow Jones Transportation Average

fell 16.61, or 0.5%, to 3094.81; the

Dow Jones Utility Average

rose 2.48, or 0.8%, to 306.99; and the

American Stock Exchange Composite Index

fell 7.38, or 1%, to 704.99.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 76.58, or 1.1%, to 6635.76 and the

Mexican Stock Exchange IPC Index

lost 41.21, or 1.1%, to 3734.20.

Thursday's Company Report

By Heather Moore
Staff Reporter

(

Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.

)

Lucent, the world's largest maker of telecommunications equipment, tumbled 8 9/16, or 7.4%, to 106 15/16 on news its first-quarter revenue growth fell about $800 million short of expectations due to a delay in finalizing some contracts. Lucent reported quarter earnings of $1.05 a share, 4 cents ahead of the 27-analyst outlook and above the year-ago 86 cents.

Ascend

(ASND) - Get Report

, which last week agreed to be acquired by Lucent, lost 8 3/16, or 9.1%, to 81 3/4.

As noted above, IBM took in 2 1/2 to 197 after Merrill Lynch increased its 12-month price target for Big Blue to 240 from 220 a share.

Mergers, acquisitions and joint ventures

America West Holdings

(AWA)

shot up 3 9/16, or 18.3%, to 23 1/16 after

UAL

(UAL) - Get Report

, parent of

United Airlines

, said last night it has expressed interest in buying the company. After reporting fourth-quarter earnings of $1.52 a share -- ahead of the 11-analyst outlook for $1.45 and the year-ago 12 cents -- UAL, fell 1 3/16 to 60.

TheStreet.com's

Holly Hegeman

broke the story

yesterday afternoon.

Out of synch with its sector peers, Internet search-engine company

Lycos

(LCOS)

soared 11 15/16, or 11.4%, to 117 after one of the company's execs told the

Financial Times

it's seeking a media or telecommunications company to become a strategic partner by taking up to a 20% stake. Eric Gerritsen, Lycos vice president for international business development, told the newspaper that Lycos wasn't pondering selling all of its business, as Excite plans to.

Earnings/revenue reports and previews

Aspect Telecommunications

(ASPT)

shrank 4, or 30.9%, to an annual low of 9 after last night reporting fourth-quarter earnings of 16 cents a share, 4 cents better than the 10-analyst view but down from the year-ago 25 cents. The company warned that it expects trouble in its North American region to cause an operating loss in the first quarter, and possibly in the second and third quarters as well. The current first-quarter estimate calls for earnings of 16 cents vs. the year-earlier 26 cents, and analysts had also expected profits in the second and third quarters. Today,

First Albany

cut the stock to neutral.

@Home gave up 10 7/8, or 10.1%, to 97 3/8 after last night posting a fourth-quarter loss of 6 cents per share, in line with the 13-analyst consensus and a nickel better than year-ago results. The company said its revenue rose to $19.2 million in the quarter from $3.7 million while its subscriber base grew 58% in the December quarter. @Home plans to acquire the aforementioned Excite.

Cirrus Logic

(CRUS) - Get Report

sliced off 1 1/8, or 8.7%, to 11 3/4 after last night posting third-quarter earnings of 4 cents a share, in line with expectations.

Go2Net

(GNET)

lowered 19 1/8, or 16.5%, to 97 3/4 after last night posting fiscal first-quarter earnings of 4 cents a share, 4 cents ahead of the two-analyst view and reversing a year-ago loss of 4 cents. The company also set a 2-for-1 stock split. CEO Russell Horowitz said he is comfortable the company can meet the full-year estimates of 24 cents a share for 1999 and 81 cents a share for 2000.

Harmonic Lightwaves

(HLIT) - Get Report

brought in 3 1/4, or 18.3%, to an annual high of 21 1/8 after last night beating fourth-quarter earnings estimates by 3 cents a share.

Legato Systems

(LGTO)

tumbled 6, or 9.2%, to 59 1/2 despite late yesterday reporting fourth-quarter earnings of 24 cents a share, 2 cents above expectations.

Midway Games

(MWY)

shaved off 1 1/2, or 14.2%, to 9 1/16 after last night reporting second-quarter earnings of 29 cents a share, on target with expectations. Today,

Hambrecht & Quist

cut the stock to hold from buy, saying, "We are disappointed by the company's inability to both select successful games for development and bring them to market in a timely manner."

Quantum

(QNTM)

sloughed off 3 15/16, or 13.9%, to 24 3/8 even after last night posting third-quarter earnings of 29 cents a share, a nickel ahead of estimates.

SBS Technologies

(SBSE)

vaulted up 4 7/8, or 25.7%, to 24 3/8 after last night posting second-quarter earnings 4 cents ahead of expectations.

Silicon Graphics

(SGI)

hopped 2 11/16, or 17.9%, to an annual high of 17 11/16 after last night reporting a second-quarter loss of 14 cents a share, 5 cents narrower than expected. Today, Merrill Lynch upgraded the stock to accumulate from neutral.

Synopsys

(SNPS) - Get Report

lifted 1 1/4 to 54 11/16 after last night announcing first-quarter earnings of 56 cents a share, matching analysts' estimates.

Xoom.com

(XMCM)

skidded 11 3/16, or 22%, to 39 13/16 after last night reporting a fourth-quarter loss of 29 cents a share, 3 cents narrower than expected.

In other earnings news:

Analyst actions

Altera

(ALTR) - Get Report

shed 7 13/16, or 11.3%, to 61 1/8 after

Morgan Stanley Dean Witter

lowered the stock to outperform from strong buy.

Becton Dickinson

(BDX) - Get Report

rose 1 9/16 to 36 13/16 after Merrill Lynch upped it to buy from accumulate.

Closure Medical

(CLSR)

plunged 7 5/8, or 16.1%, to 40 after

Lehman Brothers

lowered the stock to buy from strong buy.

Concord Communications

(CCRD)

sloughed off 5 1/4, or 9.4%, to 50 7/8 after

Bear Stearns

cut it to attractive from buy even after the company beat fourth-quarter estimates by 2 cents a share late yesterday.

VISX

(VISX)

decreased 4 1/8, or 6.7%, to 58 after

Robertson Stephens

slashed the stock to long-term attractive from buy.

Worthington Foods

(WFDS)

skidded 4 3/8, or 26.9%, to 12 after

Piper Jaffray

downgraded the stock to buy from strong buy, saying the company has signaled its fourth-quarter and full-year earnings will be well below expectations. The firm cut its price target for the company to 22 from 25.