Losses Remain Deep on Sodden Wall Street

The tech sector is continuing to lead a harsh pullback from last month's lofty levels.
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It's a cold, gray and rainy winter day on Wall Street, and the weather is the perfect metaphor for the soggy feeling in the stock market, far away from the non-shadow-spotting

Punxsutawney Phil's

supposed promise of an early spring.

Early this afternoon green spots on traders' screens are about as rare as dry spots on Manhattan's streets, as all of the market's major barometers are deep in the red. The

Nasdaq Composite Index

, down 2.1%, is pacing the downside move.

Meanwhile, in Washington, the first 1999 convening of the

Federal Open Market Committee

is about to get under way. The Fed is widely expected to leave short-term interest rates unchanged as it did in December after cutting rates three times last fall. The results of the FOMC meeting are likely to be announced tomorrow afternoon.

The Nasdaq Comp, which has had a tremendous run already this year, pulled back and was down 53 to 2458. Tech bellwethers

Microsoft

(MSFT) - Get Report

and

Intel

(INTC) - Get Report

were both taking a hit. Mister Softee was down 4 5/16 to 168 5/8, while chip giant Intel was off 3 7/8 to 134.

Elsewhere in the suffering tech world, the

Nasdaq 100

was down 2.2% and the

Morgan Stanley High-Tech 35

was down 2.4%. Semiconductor issues were taking a beating, with the

Philadelphia Stock Exchange Semiconductor Index

was down 2.3%.

In the world of the blue-chip, the

Dow Jones Industrial Average

was down 99, or 1.1%, to 9246.

Hewlett-Packard

(HWP)

, off 3 9/16 to 78 3/8, was the biggest drag on the average.

The

S&P 500

has given up 18, or 1.4%, to 1255. The small-cap

Russell 2000

has surrendered 8, or 1.8%, to 418.

TheStreet.com Internet Sector

index has tumbled 13, or 2.3%, to 535.

A sector that needed a bit of a rally (to say the least) is doing just that. The oil drillers are one of the few bright spots in the market. The

Philadelphia Stock Exchange Oil Service Index

was up 1.9%. The sector has been one of the most battered for months. Elsewhere, gold mining stocks gained. The

Philadelphia Stock Exchange Gold and Silver Index

has gained 1.2%.

The Fed meeting in the nation's capital today has forced market participants to focus front and center on the direction of interest rates. Some say that, for a while at least, the Fed is not going to do anything. In part because the U.S. economy is continuing to grow at a rapid clip -- as recent economic reports have shown -- the Fed doesn't have much of a reason to ease.

Last Friday the

Commerce Department

reported that the

gross domestic product

in the fourth quarter rose 5.6%. For 1998, the U.S. economy grew 3.9%.

Yesterday, the

National Association of Purchasing Management

said its index of manufacturing activity bounced back in January to 49.5 from a revised 45.3 reading in December.

Looking ahead, on Friday, economists will get a further look at the state of the economy when the January

employment

report is released.

"The economy is doing much better than most of us expected it could be doing at this point," said Joel L. Naroff, chief bank economist at

First Union

.

Although an easing doesn't appear to be in the offing, neither does a rate hike.

"What they are in is a watchful, waiting stance," Naroff said of the Fed. "I don't think they'll do anything through the spring.

"The Fed likes to fight inflation and it doesn't have a war going on, on any front right now," Naroff added.

Although the news about the economy is good, that doesn't mean there's been a stampede of optimism about corporate earnings going forward.

Speaking of earnings, arguably today's earnings highlight will come after the close when tech titan

Cisco

(CSCO) - Get Report

reports second-quarter results.

TheStreet.com

previewed the report in a

story this morning.

Although earnings for the fourth quarter have been better than expected, Dave Mead, chief investment strategist at

Harris Bank

, said he's less than optimistic about corporate profitability going forward. "The earnings picture is probably going to get worse," he said.

Mead is suggesting an underweighting in large-cap consumer growth stocks and an overweighting in the small- and mid-cap sector. And Mead is neutral to slightly negative on bonds. He thinks the big decline in yields is over and the long bond will be in a trading range of about 5.25% to 6% this year.

As for stocks, Mead said: "I don't think the market has a lot of legs left," Mead said, adding that he's not expecting much upside to the market this year.

Elsewhere in the news today, Brazilian President

Fernando Henrique Cardoso

today appointed

Arminio Fraga Neto

, a manager with

Soros Fund Management

, to replace

Fernando Lopes

as president of the central bank.

The

Bovespa

stock index was down 1.8%.

Meanwhile, back at home, among other market indices, the

Dow Jones Utility Average

was down 1.3%. The

Dow Jones Transportation Average

was down 1.5%, giving up some of its recent airline-fueled rally. The

American Stock Exchange Composite Index

fell 1.4%.

In the Treasury market, the 30-year bond was lately down 26/32, to 100 5/32, yielding 5.24%. (For more on the fixed-income market, see today's early

Bond Focus.)

Market internals, as expected on a down day, were negative.

On the

New York Stock Exchange

, decliners were beating advancers 2,095 to 784 on 463 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,544 to 1,203 on 545 million shares.

On the NYSE, 65 issues had set new 52-week lows while 24 had touched new highs. On the Nasdaq, 42 issues had set new highs while new lows totaled 56.

Tuesday's Midday Movers

By Heather Moore
Staff Reporter

Perot Systems

(PER) - Get Report

was flying up 26 1/2, or 165.6%, to 42 1/2 after

Morgan Stanley Dean Witter

priced its 6.5 million-share IPO at $16 a share

last night . The company, led by former presidential candidate

Ross Perot

, is the world's sixth-largest provider of outsourced information-technology services.

In other news:

Cell Pathways

(CLPA)

was crashing down 14 19/32, or 61.5%, to 9 3/16 following yesterday's announcement that the company's

Prevatac

drug aimed at preventing colon cancer did not show significant response in Phase III clinical trials. The company said it expects a delay in filing a new drug application for the drug. Cell Pathways had pinned its hopes on getting approval quickly for Prevatac. It wanted to show positive results in this small use of the drug, get it on the market and have it bought for major, blockbuster markets of cancer prevention. That strategy is completely up in the air after this.

Convergys

(CVG)

was up 2 1/2, or 13.5%, to 21 after

Merrill Lynch

raised the stock to near-term buy from accumulate.

Guidant

(GDT)

was down 2 7/8 to 55 1/2 after completing its purchase of

Sulzer Medica's

(SM) - Get Report

electrophysiology unit for $802 million. Shares of Sulzer Medica have not traded today and closed yesterday at 17 1/8.

Medtronic

(MDT) - Get Report

was up 4 5/8, or 5.7%, to 85 5/8 after yesterday receiving the go-ahead from the

Food and Drug Administration

for the next generation in its GEM family, the GEM II DR dual-chamber defibrillator.

MovieFone

(MOFN)

was up 3 1/4, or 11.9%, to 30 1/4 after

America Online

(AOL)

late in yesterday's session said it was buying the company for $388 million in stock. AOL, which was off 5 1/8 to 166 1/16, plans to integrate the movie listing and ticketing service with its

Digital City

Web site.

Nine West

(NIN)

was up 2, or 14.2%, to 16 1/16 after last night saying the

Securities and Exchange Commission

ended its probe into the company's revenue recognition practices and its Brazilian imports with no recommended action.

Rambus

(RMBS) - Get Report

was up 4 15/16, or 6.6%, to 79 3/4 after Morgan Stanley Dean Witter upped it to outperform from neutral.

Earnings/revenue movers

Apache

(APA) - Get Report

was up 5/8 to 18 3/4 after recording a fourth-quarter loss of 3 cents a share, 4 cents narrower than the 28-analyst outlook but behind the year-ago profit of 48 cents.

Chubb

(CB) - Get Report

was down 5/8 to 57 15/16 after reporting fourth-quarter earnings of 90 cents a share, in line with the 17-analyst view but down from the year-ago $1.01.

DST Systems

(DST)

was down 10 9/16, or 15.5%, to 57 11/16 even after last night beating fourth-quarter earnings estimates by 1 cent a share.

HomeBase

(HBI) - Get Report

was down 1 5/16, or 19.4%, to 5 7/16 after late yesterday saying it expects to report fourth-quarter earnings of 1 cent a share, a penny below the five-analyst forecast but above the year-ago loss of a dime.

Polo Ralph Lauren

(RL) - Get Report

was down 2 5/15, or 9.4%, to 22 1/4 even after posting third-quarter earnings of 25 cents a share, matching the 13-analyst forecast but falling behind the year-ago 29 cents. The retailer also said it will close nine stores and cut 250 jobs.

TheStreet.com

took a look at Polo's recent woes in a

story yesterday.

Sprint

was down 3 5/16 to 80 3/4 after posting fourth-quarter earnings of 79 cents a share, missing the 12-analyst estimate by 6 cents but topping the year-earlier 72 cents.

Sun Healthcare

(SHG) - Get Report

was skidding down 2 9/16, or 54%, to 2 3/16 after last night saying it sees a significant loss in the fourth quarter partly due to changes in the Medicare reimbursement system and a greater decline in demand than expected. The 13-analyst view called for earnings of 19 cents a share vs. the year-ago 36 cents.

Tech Data

(TECD) - Get Report

was down 9 15/16, or 31.4%, to 21 3/4 after warning it sees fourth-quarter earnings of 61 cents to 64 cents a share, short of the 14-analyst prediction for 69 cents but up from the year-ago 53 cents.

Wild Oats Markets

(OATS)

was up 3 5/8, or 15.3%, to 27 3/8 after late yesterday posting fourth-quarter earnings of 25 cents a share, in line with estimates.