Already battered and broken by a dismal outlook for tech earnings and anxiety over the
unresolved presidential elections, the
Nasdaq was thrown into a state of emergency this morning following profit warnings from PC-maker
and specialty chipmaker
after the market closed yesterday.
The Comp was subsequently slammed with a flurry of downgrades on PC-makers and semiconductor stocks this morning. Already at a 52-week low, the tech-heavy index shed over 129 points just 15 minutes after the bell. The Nasdaq had lately recovered some of those losses.
Dow couldn't resist tech's drag at the open, but was also plodding back to the flatline.
Gateway was one of the last earnings
survivors in the personal-computer sector. In the most disappointing quarter of earnings this year, computer leaders and several of the major chipmakers have dropped bomb after bomb on tech investors -- warning that earnings and revenues will not meet targets as the economy slows. As the last standouts fall like toy soldiers, some market pundits are hoping this may be the bitter end -- that the bad news is all out; the selling can't get any worse; a bottom is finally near; and that the market will have to turn around soon.
Still, it may take a real whopper of a catalyst to turn this thing around. The Nasdaq has made several attempts to rally back since last Friday.
Wounded Gateway Facing a Turkey Shoot Thursday
Altera Slammed in After-Hours Trading Over Revenue Warning
Legg Mason's Miller Was Cowed by Gateway, and Got His Bell Rung
Wake Up and Smell the Losses
The wave of nasty earnings surprises and analyst downgrades have severely shaken investors' faith in corporations' earnings targets -- and in the market's ability to climb out of this deep, dark hole. Even many of the brave hearts haven't been up to buying on the dips anymore. And without any buyers to prop tech stocks up, attempt after attempt at a rally folds in on itself like a house of cards.
Gateway's warning was
severe; it cut estimates for fourth quarter and the coming year sharply. Altera, meanwhile, cut its revenue estimates only.
Gateway was lately off 36%, and 431 Nasdaq stocks were hitting new 52-week lows, including Altera and competitor Xilinx, PC-makers
and optical-component maker
, among others.
Investors were hacking away at blue-chip tech bellwethers, which were mostly responsible for the Dow's fall. Software behemoth
, down 5.5%, semiconductor king
, down 9.7%, and PC-makers
, down 4.1% and 6.2%, were putting about 86 points of downside pressure on the index.
was one of the day's lone stars, lately up 4.6%.
In typical fashion, investors were sticking cash into defensive stocks such as drugs, tobacco, utilities and gold.
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Financials continued a winning streak that began last Friday, rallying back from a sharp selloff sparked by worries over credit risk in the first week of November. Financial giant
wasn't rallying along with the rest of them, however, and was down 1.5%.
was up 1.9%, while
The Bank of New York
was up 1.5%, and American Express
was 2.3% higher. The
Philadelphia Stock Exchange/KBW Bank Index
was up 1.1%.
The drugs also continued a heady rally begun in early September, when the Nasdaq began to falter. The
American Stock Exchange Pharmaceutical Index
was up 1.1%. Merck
, which hit an all-time high yesterday, was up another 1.1% to $95.94.
Howard Barlow, vice president of WHB/Wolverine Asset Management said yesterday that he didn't expect the rally in the drugs to be sustainable for much longer, since many of these names have racheted up so far in the past few months.
American Stock Exchange Tobacco Index
was up 0.6%.
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Treasuries, which have been rallying for months on the expectation that economic growth would slow -- possibly prompting the
Fed to lower interest rates -- are narrowly mixed in response to new evidence that the slowdown is in progress.
'This is what we've been discounting since May when we began to rally," said Tony Crescenzi, bond market strategist at
and CEO of
, said. "We get the action we've been looking for, and it starts to go the other way."
The benchmark 10-year
Treasury note lately was up 4/32 at 101 23/32, yielding 5.518%.
Meanwhile, people more sure than ever that the Fed will lower the
fed funds rate in the next few months. For the first time,
fed funds futures contracts are discounting more than 100% odds that the fed funds rate will be 6.25% by April, down from the current 6.5%.
The latest evidence that the economy is slowing includes a surprisingly weak showing by the
Chicago Purchasing Managers' Index
chart ), and a rise in
initial jobless claims
The Chicago PMI, which gauges the health of Midwest-based manufacturing companies, plunged to 41.7 in November -- its lowest reading since April 1991 -- from 48.7 in October. Economists polled by
had forecast a slight rise to 48.9, on average. Readings below 50 indicate that the Midwest manufacturing sector is contracting, rather than growing.
Initial jobless claims rose to 358,000, the highest since July 1998, from 339,000 the previous week. The four-week average rose to 343,000 -- also the highest since July 1998 -- from 331,000. The rise in claims for unemployment insurance indicates that demand for workers is easing as the economy slows.
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