Market Update: No Letup in Tech Bloodletting; Dow Also Underwater
The major indices weren't making amends for their big losses Friday ahead of the long weekend.
The
Dow Jones Industrial Average has spent the last hour playing footsie with the flatline, with no conviction to either the positive or negative side. It was lately slightly on the downside.
The
Nasdaq Composite Index was continuing the decline it started last week. On Friday, the index chalked up triple-digit losses and, though it was lately off session lows, it was still firmly in the red.
The tech-heavy Nasdaq had a number of catalysts to start a selloff, including negative analyst notes and mergers.
Chipmakers haven't been getting much positive attention lately and today, the sector got a spanking from
Lehman Brothers
, which cut earnings outlooks because of worsening conditions in the communications industry.
JDS Uniphase
(JDSU)
,
PMC-Sierra
(PMCS)
,
Applied Micro Circuits
TheStreet Recommends
(AMCC)
and
Broadcom
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were among those singled out; they were bleeding as a result. JDS was down 8.2% to $32.94, PMC was falling 10.7% to $46.75, Applied Micro was dropping 8% to $40.25, and Broadcom was 7.6% lower to $68.50.
Networking giant
Cisco
(CSCO)
lately was the most actively traded stock on the Comp, and it touched a 52-week low earlier today. It was off 6% to $26.56 after CEO John Chambers told a Swedish newspaper over the weekend that much of the U.S. economy is already in a recession and the downturn threatens to spread. He went on to say that he thought the
Fed should continue to cut interest rates and that he supported
President Bush's
proposed tax cuts.
Technology stocks just can't seem to find their footing. In January, the Nasdaq made steady gains, seemingly making a comeback from the losses it racked up in the last two months of 2000. But the rally was premature, and the Comp has spent this month undoing those gains.
In addition to Cisco, other tech big-caps were taking a beating, including
Sun Microsystems
(SUNW)
,
Intel
(INTC)
,
Microsoft
(MSFT)
and
Dell
(DELL)
. Some of them (Sun, for instance) were even breaching 52-week lows; none of this was helping to clear up the negative sentiment in the tech sector.
Wireless telephone company
Nextel Communications
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was getting chopped, down 13% to $22.06, after
Salomon Smith Barney
cut Nextel's
rating to outperform from buy. The firm also lowered its 12-month price target to $35 from $48 a share.
The Dow had few positive supporters lately. Retailers
Wal-Mart
(WMT)
and
The Home Depot
(HD)
were helping out. Wal-Mart, the world's largest retail chain,
beat lowered estimates, while Home Depot
met lowered estimates.
Sector Watch
The aforementioned news from the retailers was helping
soothe investors' fears concerning retail. The
S&P Retail Index
was 2.6% higher. Not all was great in the sector, however. Drugstore chain
Duane Reade
(DRD)
was falling 16% to $33, despite meeting estimates, because it forecast 2001's first-quarter and full-year results below estimates.
Financials were taking a beating today, with the
American Stock Exchange Broker/Dealer Index
4.6% lower and the
Philadelphia Stock Exchange/KBW Bank Index
dropping 3.1%.
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Bonds/Economy
Treasury prices are mixed in afternoon trading.
The benchmark 10-year
Treasury note lately was up 1/32 to 99 5/32, lowering its yield to 5.109%.
The
Standard & Poor's
speculative grade credit index, which measures the difference between the yields of government Treasuries and those of bonds rated below BBB+, was at 894.5 basis points, or 8.945%, on Friday. The difference has steadily decreased from a high of 10.74% on Jan. 2, just before the
Federal Reserve began cutting rates. Expectation that the economy will recover with help from the Fed has sent U.S. Treasury prices lower on weakening demand, preventing yields from falling further. (Prices and yields move inversely.) This has contributed to the narrowing of the index.
A recent survey by the
Federal Reserve Bank of Philadelphia
estimates that the U.S.
gross domestic product
(
definition |
chart |
) should grow by about 2.2% in 2001, down from the 3.3% annual growth that was forecast two months ago. However, that's not likely to jolt the market, as most economists and regional Fed presidents lately have been pegging the growth rate at 2% to 2.5%.
There is no economic news due out today.
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