(Updated from 12:12 p.m. )
For the second session in a row, Wall Street is pouring cold water on last week's white-hot rally. Shortly after the opening bell, both the
Dow Jones Industrial Average and the
Nasdaq Composite Index slid.
In the wake of the
surprise decision to cut interest rates last Wednesday, the major stock market indices soared. For the week, they registered staggering gains. The Nasdaq popped 10.3%, as investors renewed their faith in tech stocks. Meanwhile, the Dow rose 4.5%. But on Friday, investors began to take some of their winnings off the table. And once again this morning, they were skimming off the top.
"We've probably run too far, too fast," Ned Riley, chief investment strategist at
State Street Global Advisors
said Friday. Aggressive rallies have been followed by vicious selloffs over the past few months, and some market experts were worried about the magnitude of last week's run-up. But they are encouraged by the fact that the recent pullback has not been extreme.
Dragging on the market today were technology stocks, as investors rotated out of the riskier positions they re-inhabited last week. Shares of large-cap tech issues
were off 5.1% to $62.03,
was down 2.3% to $67.40 and
was down 9.4% to $17.35.
Semiconductor stocks, the key beneficiaries of last week's rally, were moving lower after influential
analyst Joe Osha downgraded
and a bunch of chip stocks to near-term neutral from near-term accumulate. On the list with Intel were
Applied Micro Circuit
"There is no identifiable evidence that the semiconductor recovery is closer at hand," Osha wrote in his research report today. What's more, the analyst thinks Intel is still expensive. Recovery in the chip sector has been a topic of great debate among Wall Street analysts over the past few weeks. Less than two weeks ago,
Salomon Smith Barney
analyst Jonathan Joseph called a bottom in the sector, only to be countered by
Dan Niles. On the heels of Osha's note today, the
Philadelphia Stock Exchange Semiconductor Index
was off 5.4%.
Also being dragged lower by analysts,
plunged 10.2% to $17.73 after Lehman downgraded the business software compnay to buy from strong buy. The investment firm said the present quarter could be weak and that Oracle's valuation, at 17.8 times earnings, is well above historical norms. Over the past months, investors have picked up some Nasdaq stocks based on the idea that they couldn't fall much further. Now they are beginning to think again about the stocks' fundamentals, namely their price relative to earnings.
In the meantime, safety stocks were clocking in gains.
gained 2.1% to $48.16,
was moving up 0.7% to $41.03 and
had been going down, but lately was flat at $40.35.
Week No. 2 of earnings season got under way this morning. On the lineup today:
, and Dow components
. 3M met earnings expectations, but announced that it would cut jobs. Exxon easily beat analyst targets. SBC cut its earnings guidance for the year. And American Express, which had recently warned about financial problems, beat lowered analyst estimates.
Financial stocks were lower, while energy and tobacco names were rising.
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