(Updated from 11:05 a.m.)
A market jittery over slowing telecom and technology spending got socked in the gut this morning with revenue warnings and bearish analyst comments on the telecom and semiconductor sectors.
warned of slower-than-expected revenues in the fourth quarter and announced plans to spin off its consumer business, MCI.
wrote a separate story about the
lowered its price target on French computer and phone-networks maker
. The downgrade on Alcatel may have caught some by surprise after that company reported strong earnings Tuesday morning and issued and optimistic outlook for the future.
In the semiconductors' corner, semis-equipment maker
issued a revenue warning last night, and
Morgan Stanley Dean Witter
cut its ratings on four major semiconductor companies due to "low capital spending growth in the chip industry."
MSDW lowered its ratings on
Advanced Energy Industries
to outperform from strong buy.
The casualties from this morning's telecom fallout included troubled long-distance carrier
Worldcom, meanwhile, was the
Nasdaq Composite Index's most actively traded stock, and was lately falling 19%. Altera was down 17.7%, KLA-Tencor was off 2.8% and Applied Materials was 4.2% lower. The
Philadelphia Stock Exchange Semiconductor Index
was falling 2.7%.
Finally, the optical and networking names were back in a hole after thundering ahead yesterday.
was falling despite reiterating expectations that it would meet previously set revenue and earnings per share guidance. Nortel was off 2.8% and
was losing 0.5%.
Over on the
New York Stock Exchange, brokerages were under fire after Goldman Sachs reduced its fourth-quarter earnings forecasts by about 9% for brokerages
, Morgan Stanley Dean Witter
. Goldman cited softness in the IPO market and "less transparent businesses like private equity."
Solomon Smith Barney
followed Goldman's lead, but also included Goldman
in the fourth-quarter cuts. Solly reduced Morgan Stanley's fourth-quarter EPS view to $1.42 from $1.55 and Lehman's to $1.31 from $1.38 a share. Goldman Sachs was knocked down to $1.35 from $1.55 a share.
Lehman was falling 4.6%, MSDW was off 3.1% and Merrill was down 3.1%. Goldman was lately 3.9% lower.
Finally, this morning's October
National Purchasing Manager's Index
, known as the PMI, showed that manufacturing activity contracted for the third month in a row. The PMI came in at 48.3 compared to expectations of 49.8 and the previous month's 49.9. The PMI signals expansion when it is above 50 and a contraction when it comes in lower.
This is an important number to watch, considering the growing concern about slowing business spending on plant and equipment.
recently took a look at how slowing capital expenditures is
Federal Reserve Chairman
Alan Greenspan and Wall Streeters really want to see from economic data right now is strong productivity growth coupled with manageable inflation. And business spending is partly what allows for increased productivity.
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Internet stocks were flying this morning, perhaps because there wasn't any bad news on them and investors were looking for somewhere to stick the cash they were drawing out of other tech areas. Or perhaps it was
, which this morning reiterated confidence in its business strategy. Amazon was up 4.4%,
was soaring 7%,
was rising 5%,
was lifting 2.1% and
was jumping 17%.
TheStreet.com Internet Sector
index was up 3.9%.
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Bonds were higher, with traders continuing to see further signs of a slowing economy -- which would underpin the bond market's strong performance. Weakness in the stock market also is helping bonds.
The benchmark 10-year
Treasury note was up 1/32 to 99 30/32, yielding 5.757%.
Purchasing Managers' Index
) fell to 48.3 from 49.9 in September, signaling a contraction in the manufacturing sector.
) for September rose 2.4%, after a 1.8 % gain in August.
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