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Market Update: Nasdaq Correction Spreads to Dow, Broader Market

<LI>PMC-Sierra knocks over communications chipmakers.</LI><LI>JDS Uniphase up despite recent warnings.</LI><LI> IBM, Microsoft, Qualcomm rise.</LI>

With little direction from

Federal Reserve chairman

Alan Greenspan in his speech before the


Thursday, investors turned earnings-focused again. And they found themselves wading through a sludge, with several high-tech heavyweights warning about future growth prospects and announcing new job cuts.

Some say the

Nasdaq Composite Index was due for a pullback anyway after putting in an impressive performance so far this year. That downswing on the Nasdaq began Thursday -- when the tech-clogged index lost 3.5% of its year-to-date gains -- and was continuing today. But stocks were seeing weakness across the board.

The blue-chip

Dow, which performed better yesterday, tried to launch itself into the green again today but had lately lost its footing and was back in the red. The

S&P 500 was wading in the red.

The communications-equipment stocks were the most battered in techland this morning. Communications equipmentmakers were knocked down by a dire warning from



, which

said orders fell severely in the fourth quarter. The company said the economic slowdown has caused an inventory glut among its customers. Six firms rushed in to downgrade the stock this morning, and some said PMC-Sierra's problems were not stock-specific.

PMC-Sierra was off 27.3%,



was falling 9.1% and



was losing 14%.

But some of the optical stocks were bouncing back, despite a warning about growth prospects from

JDS Uniphase


. JDS said Thursday that growth was

hitting the skids, echoing fellow optical


(GLW) - Get Corning Inc Report

Wednesday warning. JDS blamed high customer inventory levels and weak customer spending prospects.

But Corning's warning had already inspired a selloff in the sector yesterday. That selloff took Corning down 19%, networking giant


(CSCO) - Get Cisco Systems, Inc. Report

8% lower and former investor favorite


(CIEN) - Get Ciena Corporation Report

down 12%.

JDS was lately up 5.1% and Corning was down 0.5%. Cisco was falling another 6.8% and Ciena was down 2.8%.

Swedish mobile phone giant



was also falling after it reported a 46% drop in pretax income on a year-over-year basis and a 64% drop in earnings, said it will quit producing its own mobile phones and that it was slashing jobs to save $1.55 billion a year. Ericsson was off 14.9%, and competitor



was falling 1.4%.

took a look at Ericsson's

ugly report and at the repercussions of a growing round of

job cuts. Telecom



is also planning layoffs, the

Wall Street Journal

reported today. The company expects to let go between 10% and 15% of its workforce as part of a restructuring effort.

Not all was lost in tech, with PC maker


(IBM) - Get International Business Machines (IBM) Report

, software mammoth


(MSFT) - Get Microsoft Corporation (MSFT) Report

and wireless-communications company


(QCOM) - Get QUALCOMM Incorporated Report

all higher. Qualcomm reported better-than-expected earnings after the close Thursday and fell short of consensus revenue estimates. But it said it is comfortable with analysts' estimates for the current quarter and the year.

The Dow was falling on weakness in diversified industrial

United Technologies

TheStreet Recommends


, consumer products giant


(MMM) - Get 3M Company Report

, oil driller


(XOM) - Get Exxon Mobil Corporation Report

and airplane manufacturer


(BA) - Get Boeing Company Report


Another Dow component,


(HON) - Get Honeywell International Inc. (HON) Report

, was rising despite missing fourth-quarter earnings estimates by a penny with 70 cents per share. The company has yet to complete its merger with

General Electric

(GE) - Get General Electric Company (GE) Report

. The stock was up 0.9%.

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Sector Watch

There was a lot of red all of everywhere today and few safe havens. Only airline and drug stocks were leaning upward and just by a hair. The

American Stock Exchange Airline Index

was rising 0.04%, while the

American Stock Exchange Pharmaceutical Index

was lifting 0.6%. The drug stocks got a bit of a rally yesterday after a two-day selloff despite strong earnings reports.


(MRK) - Get Merck & Co., Inc. (MRK) Report

was up 1.5% to $83.13 and



was up 2.5% to $52.25.

Most airline stocks were lower, but

KLM Royal Dutch Airlines



Southwest Airlines

(LUV) - Get Southwest Airlines Co. Report

were up 1.8% and 2.4%.

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Treasuries started the day stronger but have slipped lately as dealers indulge in some profit selling or complete other trades within the range. Factory data released this morning indicated further slowing in the manufacturing sector and will have negative implications for the upcoming

gross domestic product


definition |

chart |


) number next week. For now, the market has settled on hopes of a half percentage-point cut in the

fed funds rate during the Federal Reserve's meeting on Jan. 30 and Jan. 31. Twenty-four out of 25 primary dealers expect that to happen, as reported by



The benchmark 10-year

Treasury note lately was down 1/32 to 103 22/32, yielding 5.253%.

In economic news,

durable goods orders


definition |

chart |


) rose 2.2% in December, after a 1.8% increase in November. This was contrary to expectations, as economists polled by


had predicted a fall of 1.7%. But the number is subject to much volatility and it was also the high demand for new commercial aircraft that accounted for most of the increase. Excluding transportation equipment, new orders fell 1.4% for the month after having gone up by 0.3% in November. The shipments of finished goods declined for the third straight month.


Help Wanted Index


definition |

chart |


), which tracks the number of recruiting ads across the country, rose by 4 points to 79 in December.

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