(Updated from 3:23 p.m.)
Taken together, a profit warning from
and a stronger-than-expected
employment report brought the stock market to its knees today -- and kept it there. The Dow closed off 215.84 to 10,642.67, while the Nasdaq finished down 115.2 to 2053.5, a loss of more than 5%.
Investors were sniffling on the anniversary of
Nasdaq 5000, as the technology-laden index hit its lowest level in two years. The measure had managed to stay above 2100 all week long before today. The steep loss on the
Dow Jones Industrial Average comes after five straight rallies, when the index racked up 400 points. Given the magnitude of today's selloff, trading volume is comparatively light.
Yesterday evening, Intel
announced that first-quarter revenue would fall about 25% below fourth-quarter levels and that it would eliminate 5,000 jobs. The semiconductor manufacturer cited familiar culprits for its shortfall: slowdowns in PC demand and the broader U.S. economy. Intel Chairman Andy Grove had given Wall Street a heads-up prior to last night's announcement, confessing on Tuesday evening that he didn't see demand for semiconductors snapping back any time soon.
In recent trading, the chipmaker was down 12% to $29.44, while the
Philadelphia Stock Exchange Semiconductor Index
, which tracks the chip industry, was lower by 7.2%. This is the third straight quarter that Intel has warned about its financial results. Among the investment firms to
cut their 2001 earnings-per-share estimates for Intel this morning were
Credit Suisse First Boston
"It's very difficult for us to pound on the table and tell our clients in Japan to buy stocks right now," said Ned Collins, executive vice president of U.S. stocks at
Daiwa Securities America.
For his part, Collins thinks that Intel's warning signals that it might take longer than expected for technology companies to work through their inventory buildups.
Diminishing the chances of a more aggressive interest-rate policy from the
Federal Reserve was a stronger-than-expected
employment report.. New nonfarm payrolls for the month totaled 135,000,
almost double the 68,000 economists had been forecasting. Unemployment stayed put at 4.2% -- economists had expected it to tick up to 4.3%. Market experts still expect the central bank to ease rates by 50 basis points at its upcoming meeting on March 20, but the stock market wasn't reflecting that view in recent action.
After rallying for five sessions straight, the Dow was dragged lower by technology components caught in the Intel tailwind.
was off 5.2% to $56.69, while
shed 6.7% to $99.29.
Other bellwethers in hot water today include
. After a
report this morning contended that the networking equipment manufacturer planned to cut its workforce, the company confirmed that it would be slashing jobs
by 15%. At last look, Cisco had shed 10.4% to $20.63.
In addition to the fallout from Intel, Microsoft was suffering from
speculation that it will be the next tech blue-chip to join the warning club. Further hurting Microsoft's stock were earnings downgrades from analysts, who worry about the
ripple effect of Intel's warning on PC makers and other chip stocks. Back in January, Microsoft memorably issued a profit warning for the first time in a decade, pointing to a falloff in demand for computers.
Also warning last night,
RF Micro Devices
said that its fiscal fourth-quarter earnings and revenue would fall below previous forecasts, due to weakness in the wireless market and an inventory buildup. Shares of the radio frequency products manufacturer were lately off 4.2% to $12.94.
Other chips dropping lately included
, which was 4.3% lower to $15.55. This morning, Salomon Smith Barney clipped its 2001 earnings estimates for the company, noting poor fundamentals in the wireless and computer chip businesses.
While virtually every sector of the market was ailing, one group that maintained a healthy glow was the drug sector. Lately, the
American Stock Exchange Pharmaceutical Index
was rising 0.7%, with components
ahead 1.2% to $75.69 and
up 1.1% to $42.45.