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There was no doubt that the market was in for trouble today, when Nortel (NT) fell short of revenue estimates last night. Just how far investors took down technology stocks was apparent in late-day action.

Dragged down by Nortel's news, the

Nasdaq Composite Index ended deep in negative territory and weakening into the close. The

Dow Jones Industrial Average was also lower.

Shares of Nortel fell 28.9%, on the heels of its

earnings report last night. The company revised its outlook for optical sales for the year. This afternoon, the networking stock was the most actively traded issue on the

New York Stock Exchange, with a whopping 123 million shares changing hands.

Not surprisingly, research

analysts jumped on Nortel and related companies this morning.

Technology stocks that dropped in sympathy with Nortel included fellow optical-networking leader

JDS Uniphase


, was down 25.3%. JDS reports its earnings tomorrow. The company's acquisition target,



, was also lower, down 25.9%.

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Other stocks feeling the "Nortel effect" today were

Micron Technology

(MU) - Get Micron Technology, Inc. Report

, down 9.9%,

Applied Micro Circuits


, behind about 25.4%, and


(SMTC) - Get Semtech Corporation Report

, down 15% to $28.75.

On the Dow front, strength in defensive stocks was mixed in with weakness in technology issues.

Johnson & Johnson

(JNJ) - Get Johnson & Johnson Report

-- up 2.4% -- and

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. Report

-- up 1% -- added 21 points to the measure's upside. Also,


(BA) - Get Boeing Company Report


Procter & Gamble

(PG) - Get Procter & Gamble Company Report

together contributed about 18 points.




countered Dow point gains with a 34-point negative draw. H-P was down 6%.

Fellow boxmaker



was up 4.3%, despite warning last night that fourth-quarter earnings would fall 4 cents short of analysts' 41-cent estimate. The company blamed the

beleaguered euro for its troubles. Analysts rescued Compaq's stock today.

J.P. Morgan

upgraded the stock to buy from market perform, while

Credit Suisse First Boston

reiterated its strong buy rating.

Telecommunications giant


(T) - Get AT&T Inc. Report

fell 13% after it announced a plan to break the company into four companies with their own common or tracking stocks.

Merrill Lynch

downgraded the company to near-term accumulate from near-term buy. Merrill similarly cut long-distance carrier



. WorldCom was down 6.3%.

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Sector Watch

Investors emptied their pockets into defensive stocks in afternoon trading. The

American Stock Exchange Pharmaceutical Index

was 2% higher, led by Johnson & Johnson and

American Home Products


, ahead 3.5%.

On a down day for technology stocks, the Internet Sector

was behind 2.6%. Shares of component

(AMZN) - Get, Inc. Report

jumped 7.8%, in reaction to a narrower-than-expected loss and the company's optimism about the crucial fourth quarter. (

discussed Amazon's earnings in another



Philadelphia Stock Exchange Semiconductor Index

dropped 7.2%, as a result of Nortel and Compaq's news. Among the hardest-hit components were

Linear Technology


, down 13.6%, and

Lattice Semiconductor

(LSCC) - Get Lattice Semiconductor Corporation Report

, behind 10.9%.

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The bond market has now reversed course. The 10-year

Treasury note was at 100 15/32, off 1/32 to yield 5.686%. The 30

Treasury bond was at 107 5/32, up 2/32 to yield 5.744%.


Mortgage Applications Survey


definition |

chart |


) for the week ended Oct. 20, rose to 587.2 from 498.6 in the previous week. Refinancings continued to rise, while the purchase index slipped to 298.7 from 311.1.

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