Market Update: Lingering Opticals Jitters Weigh on Stocks - TheStreet

The market continued its recent slide into the red this morning, led down by lingering concerns over opticals. The

Nasdaq Composite Index was lately trending to the downside while the

Dow Jones Industrial Average was also meandering in negative territory, though down less steeply.

Before the open, market pros were wondering whether stocks would get a technical bounce today or retest last Wednesday's closing low of 3074, which most of the market has identified as a bottom. It looks like the market may be doing the latter.

Early on, pundits counseled attention to the "tells," those sectors that -- because they have been market leaders -- could indicate where the broader market's going. The optical stocks, the semiconductors and the banks were among the sectors Wall Streeters said could play crystal ball to the market's direction today.

And what do you know? After showing some strength at the open, all three sectors lost their stamina and slipped into the red.

Jitters over optical networking leader

JDS Uniphase

(JDSU)

, which reports earnings after the close today, were the biggest concern. JDS's biggest customers, telecommunications equipment makers

Nortel Networks

(NT)

and

Lucent

(LU)

, have spooked the market of late with revenue warnings. Lucent also booted its chairman and CEO this week after several quarters of disappointing profits.

In fact, JDS got hit with a downgrade yesterday morning on the heels of

Nortel's

(NT)

warning. Nortel said Tuesday evening that it expected a

slowdown in optical sales for the year, whupping the entire sector, and market.

TheStreet.com

took a look at yesterday's

opticals selloff in a separate story.

Early strength in

J.P. Morgan

(JPM) - Get Report

had faded, and the stock was off 2.0%. That stock and fellow financial

American Express

(AXP) - Get Report

were knocking a combined 22 points off the blue-chip index.

Dow's tech bellwethers

IBM

(IBM) - Get Report

, and

Intel

(INTC) - Get Report

continued to show mild strength, however, lately up 1.6% and 2.6%, respectively.

In opticals,

Cisco

(CSCO) - Get Report

was one of the only remaining strongholds, trading 1.9% higher.

But the rest of the sector was under fire. Nortel, JDS Uniphase,

Ciena

(CIEN) - Get Report

,

SDL

(SDLI)

and

Corvis

(CORV) - Get Report

, among others, were still suffering, off 3.6%, 7.7%, 18.2%, 10.2% and 10.5%, in that order. Yesterday, Nortel lost almost a third of its value.

JDS and Cisco were the most actively traded stocks on the Nasdaq exchange. Telephone and data services company

WorldCom

(WCOM)

and Ciena followed. WorldCom was off 7.2% despite matching Wall Street's earnings estimates this morning, with a 26% increase in third quarter profits, and confirming its intention to unveil a restructuring plan next week. Yesterday, investors were less than enthusiastic about

AT&T's

(T) - Get Report

announced restructuring. The telecom titan said it would split itself into four separate units. AT&T was lately down 5.9%.

Previously up by 1.5%, the

Philadelphia Stock Exchange Semiconductor Index

had lately turned down, off 0.6% to 668.9. The

Philadelphia Stock Exchange/KBW Bank Index

had also slipped into the red, lately off 2.1%.

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Sector Watch

Energy stocks were recovering a bit from their recent slide after oil prices spiked higher this morning. Concerns that Iraq could disrupt oil shipments pushed December's Brent crude futures up 79 cents to $33.75 shortly after the opening. Iraq is demanding oil for food payments in euros, a proposal that is now before the U.N. Security Council. Traders are worried that Iraq could withhold oil if it doesn't get its way.

The sector rallied powerfully and steadily through late summer but began to falter mid-September. The

American Stock Exchange Oil & Gas Index

was lately up 0.5%, the

American Stock Exchange Natural Gas Index

was up 0.5% and the

Chicago Board Options Exchange Oil Index

was 0.4% higher.

Biotechnology stocks continued their recent slide.

Amgen

(AMGN) - Get Report

, which reports earnings today, was falling, off 1.1%. The

Nasdaq Biotechnology Index

was 0.8% lower.

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Bonds/Economy

Bonds were up this morning following a down day yesterday.

The benchmark 10-year

Treasury note was lately up 2/32 to 100 16/32, yielding 5.684%.

The 30-year

Treasury bond was at 107 9/32, 4/32 higher, to yield 5.733%.

Economic data this morning was relatively benign.

The

Employment Cost Index

(

definition |

chart |

source

) for the third quarter rose 0.9%, after a 1% gain in the prior quarter. A 1% increase had been expected.

Initial jobless claims

(

definition |

chart |

source

) for the week of Oct. 21 were lower at 305,000, from 310,000 in the previous week.

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