Last night's profit warnings from PC-maker
and specialty chipmaker
, which went over with Wall Street like
did with network executives, has the major indices contending with triple-digit losses in the late afternoon.
Stabilization was not in sight; Elvis isn't coming back anytime soon. The
Dow Jones Industrial Average was lately down 300 points. The
Nasdaq Composite Index, which tried to cushion its blows mid-morning, was off more than 150 points, close to its lowest levels of the day. It's lost half its value since early March. Ouch.
Without buyers, stock prices are continuing to free fall. Investors today have picked over the Nasdaq's carcass, sending nearly 800 of its components to new 52-week lows. Shares of Gateway had lately plunged 39%, while Altera sunk 8.4%. Many of the biggest names in technology --
-- had lost more than 10% in late-day trading.
, off 6.6%, and
, behind 7.8%, were, with Microsoft, leading the selloff on the Dow side.
Adding to the carnage in the wake of last night's pre-announcements has been an onslaught of analyst downgrades on technology stocks this morning.
Salomon Smith Barney
all lowered their recommendations on Gateway. Salomon Smith Barney also cut its rating on Dell. In recent trading, the
Philadelphia Stock Exchange Computer Box Maker Index
, which tracks the performance of PC stocks, had lost 10.6%.
Wall Street has focused on Gateway's profit warning. After the closing bell, the boxmaker warned that it anticipates fourth quarter sales and profits to come in sharply below Wall Street's forecasts.
"The economic slowdown, coupled with ongoing shifts in PC seasonality, clearly had a significant impact on our sales over the holiday weekend. We expect these issues will continue to have an effect on overall demand in the next 12 to 18 months," Gateway said in a statement. The company also lowered its full-year earnings guidance for 2001. (
analyzed Gateway's news in a separate
Worth noting is that Gateway was the only major boxmaker to survive the third-quarter -- which scalded the PC sector -- largely unscathed. But the PC manufacturer has been badly burned in the fourth quarter.
On a day where good news was hard to find, Goldman Sachs' chief equity strategist Abby Joseph Cohen this morning reiterated her 12-month target for the
S&P 500 of 1650, which would be a 25% gain in the next year. Cohen, however, is no longer mentioning that in October she predicted that the S&P would be at 1575 value by the end of 2000. Her words have had no impact today.
Altera was lately sharply lower after bottoming at a 52-week low of $19.63. After yesterday's close, the chipmaker lowered its guidance for fourth-quarter revenue, citing sluggish November sales. The warning brought on a slew of downgrades from the likes of
Credit Suisse First Boston
The semiconductor sector has seen staggering losses today. Among the chips falling,
fell 9.6% and
, which saw its earnings-per-share estimates downgraded by
along with Altera on Monday, decreased 9.9%. The
Philadelphia Stock Exchange Semiconductor Index
had recently staggered 7.7%.
In afternoon trading,
TheStreet.com Internet Sector
had stumbled 7.5%. In the midst of the holiday season, which is absolutely critical for Internet retailers,
lost 12% and
fell 8.9% in recent trading.
In fact, there was not much holiday cheer for retail stocks today as disappointment with today's same-store sales reports drove investors to sell. Most U.S. retailers reported only modest gains in November same-store sales, showing that consumers continue to be cautious about their spending as signs that the economy is slowing grow.
S&P Retail Index
was off 2.9%. A few retailers did report strong same-store-sales, including
however. Kohl's was up for most of the day, but it lately had turned down, losing 0.4%.
Drug stocks continued their heady rally begun in early September, when the Nasdaq began to falter. The
American Stock Exchange Pharmaceutical Index
was up 0.2%.
, which hit an all-time high yesterday, was off 0.9%.
Oil stocks continued to lose ground today. The
Philadelphia Stock Exchange Oil Service Index
Back to top
Treasuries are rallying in response to the latest leg down in stock prices, dropping yields to new lows for the year. Falling stock prices continue to suggest to bond investors that growth will slow more in the months ahead, possibly prompting the
Fed to lower interest rates.
The benchmark 10-year
Treasury note lately was up 17/32 to 102 7/32, its yield falling to 5.449%, the lowest yield for the 10-year note this year.
People are surer than ever that the Fed will lower the
fed funds rate in the next few months. For the first time,
fed funds futures contracts are discounting more than 100% odds that the fed funds rate will be 6.25% by April, down from 6.5% currently.
Earlier, Treasuries, which have been rallying for months on the expectation that economic growth would slow, largely ignored evidence that the slowdown is at hand.
"This is what we've been discounting since May when we began to rally," said Tony Crescenzi, bond market strategist at
and CEO of
, said. "We get the action we've been looking for, and it starts to go the other way."
The latest evidence that the economy is slowing includes a surprisingly weak showing by the
Chicago Purchasing Managers' Index
chart ), and a rise in
initial jobless claims
The Chicago PMI, which gauges the health of Midwest-based manufacturing companies, plunged to 41.7 in November, its lowest reading since April 1991, from 48.7 in October. Economists polled by
had forecast a slight rise to 48.9, on average. Readings below 50 indicate that the Midwest manufacturing sector is contracting rather than growing.
Initial jobless claims rose to 358,000, the highest since July 1998, from 339,000 the previous week. The four-week average rose to 343,000, also the highest since July 1998, from 331,000. The rise in claims for unemployment insurance indicates that demand for workers is easing as the economy slows.
Back to top