Market Update: Downgrades Wreak Havoc on Tech-Heavy Nasdaq - TheStreet

Major indices got knocked for a loop this morning by a one-two punch in the form of major downgrades.

Chip-maker

Intel

(INTC) - Get Report

was under pressure after negative comments from influential

US Bancorp Piper Jaffray

Ashok Kumar. And the drug sector was in pain after

Banc of America Securities

downgraded the sector.

Market watchers initially were expecting last week's quiet optimism to trickle over into this week, particularly following Friday's friendly

employment report

and manufacturing activity data.

Instead, investors were suffering a bout of post-holiday blues along with the broader market. Not helping matters any were group downgrades on oil stocks from

Deutsche Banc Alex. Brown

and a cut on trucking and transportation stocks courtesy of

Morgan Stanley Dean Witter

.

The

Dow Jones Industrial Average was hurt early on by Intel and drug component

Merck

(MRK) - Get Report

, which was cut to market perform from buy at Banc of America. The Dow was recently off 3 to 11,235.

The tech heavy

Nasdaq Composite Index was also getting bashed by Intel and Internet heavy-hitter

Yahoo!

(YHOO)

, and was 66 to 4169. There was no new news on Yahoo! this morning.

Elsewhere in the market, the broader

S&P 500 was down 13 to 1508, the small-cap

Russell 2000

was off 2 to 540.

Despite weakness in Yahoo,

TheStreet.com Internet Sector

index was up 4 to 851.

Sector Watch

Investors' least favorite sectors so far this morning were health care and biotechnology.

Big movers included

America Online

(AOL)

, which was off 2.6%. Over the weekend, news came out that the

Federal Trade Commission

likely will block AOL's $129 billion acquisition of

Time Warner

(TWX)

unless the companies agree to let competitors use their cable lines.

TheStreet.com

wrote about the

FTC's concerns in a separate story.

Meanwhile,

WorldCom

(WCOM)

was the big noise in telecom. The company confirmed this morning that it will buy telecom provider

Intermedia Communications

(ICIX)

for close to $3 billion in cash as well as payment of more than $3 billion in Intermedia's debt.

The

American Stock Exchange Pharmaceutical Index

was lately 3.4% lower after

Banc of America

downgraded the entire group to market perform from overweight on concerns of slowing growth. Sector heavyweight Merck, which was lowered to market performer from strong buy, was off 3.3%.

Abbot Laboratories

(ABT) - Get Report

was off 2.2%.

The

Nasdaq Biotechnology Index

was down 3%.

Treasuries continued to trail lower this morning, with the benchmark 10-year note down 2/32 to 100 15/32, yielding 5.69%.