Market Update: Nasdaq Crashes Through 3000 on H-P News, Dow Hurtles Lower, Too
Some ugly earnings from computer-maker
Hewlett-Packard
(HWP)
this morning stung the market in a tender and sensitive place and slapped the
Nasdaq Composite Index below the key 3000 level shortly after the bell. The Nasdaq hasn't traded below 3000 since October of last year, when it began its heady ascent towards 5000.
Wall Street is pretty sensitive about earnings these days, as a slowdown in the economy, and a resulting drop in capital spending on computers and telecom begin to take their toll. And it's a particularly bad time for PC-makers. In the past month, several computer leaders have cut their earnings outlook for upcoming quarters, and the whole sector has been punished for it. The latest of the bunch was
Dell
(DELL) - Get Dell Technologies Inc. Class C Report
, which Friday helped to knock the Nasdaq down 171.4, or 5.3% to 3028.9. The Dow also fell on its face Friday, losing 231.3, or 2.13%, to 10,602.95.
TheStreet.com
recently wrote about the outlook for
capital expenditures. We also looked at how an economic slowdown will impact a slowdown in
corporate earnings.
But much of this bad news may already have been accounted for in the sector's stocks. After hitting a new low at 2902, the Nasdaq might try to rebound.
Still, the PC-makers weren't getting much relief. H-P's shares were off 13.3%. Apple was off 2.6%, Compaq was 4.8% lower and
Gateway
TheStreet Recommends
(GTW)
was 4.5% lower. Dell was the healthiest of the group, falling only 1.1% after its Friday crash.
A
Dow component, the blue-chip tech stock was also driving some hemorrhaging on that index. In fact, H-P was lately striking about 32 points from the Dow. Merger partners
Honeywell
(HON) - Get Honeywell International Inc. Report
and
General Electric
(GE) - Get General Electric Company Report
were also doing their part to trip up the Dow after Honeywell said it had suspended plans to sell four units due to its merger with
General Electric
(GE) - Get General Electric Company Report
Together, the two diversified industrials were tearing some 26 points from the index.
H-P, which wasn't scheduled to report until Wednesday, missed fourth-quarter earnings estimates by a full 10 cents, with 41 cents per share. Only a month ago, the company said it expected to meet earnings and revenue forecasts for the quarter. The PC-maker blamed "margin pressures, adverse currency effects, higher-than-expected expenses, and business mix" for the current quarter's earnings miss, but said demand remained strong.
TheStreet.com
wrote a more detailed story about the
earnings announcement.
In other H-P news, the company also said today that it ended its quest for the consulting arm of
PricewaterhouseCoopers
.
Meanwhile,
Applied Materials
(AMAT) - Get Applied Materials Inc. Report
was taking a hit after
Credit Suisse First Boston
lowered its price target on the stock this morning. CSFB analyst John Pitzer cut its forecasts for the company's 2001 earnings per share to $2.85 from $3.25 this morning. CSFB said it might have a more bearish view of the current inventory correction than most, however. Applied Materials was falling 2.4%.
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Sector Watch
Investors didn't like much of anything today. Defensives such as the drug, tobacco and utility stocks were all weaker, with the
American Stock Exchange Pharmaceutical Index
falling 2.7%, the
American Stock Exchange Tobacco Index
was falling 2.4% and
Dow Jones Utility Average
retreating 0.3%.
A couple of big food stocks, also considered defensives, were faring better, however.
Conagra
(CAG) - Get ConAgra Brands Inc. Report
was up 1.1% and
Unilever
was climbing 2.1%.
Most semiconductor stocks were bouncing higher this morning, however, despite a lowered earnings view from CSFB on Applied Materials. The sector has been trending lower since early September.
Altera
(ALTR) - Get Altair Engineering Inc. Report
was up 1.4%,
KLA-Tencor
(KLAC) - Get KLA Corporation Report
was rising 2.6% and
National Semiconductor
(NSM)
was lifting 2.2%.
Intel
was an exception, slipping 0.2%.
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Bonds/Economy
Maintaining their positive tone of last week, bonds have opened firmer today. The fixed income market is benefiting from a run of softer economic data, sell-offs in the equities market and the stalemate in Florida.
The benchmark 10-year
Treasury note was lately at 99 28/32, up 7/32, to yield 5.768%.
The 30-year
Treasury bond was at 105 25/32, up 15/32, to yield 5.837.
The 30-year bond underperformed the 10-year on Friday and seemed to be catching up today.
No market-moving economic data are due today.
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