The

Nasdaq Composite Index hasn't been able to rebound from the effects of

Nortel

(NT)

and its related friends in the optical playfield.

Nortel, the Canadian optical giant that after the closing bell yesterday warned of slowing sales for the year, was lately down 28.4%. It was the most actively traded stock on the

New York Stock Exchange and was showing both the largest point and percentage drops on that exchange. Institutional investors like mutual fund managers and hedge funds are bailing out -- 80% of Nortel trades today are block trades, meaning those trades that move in lots of 10,000 or more shares. That's much higher than the norm -- 53% of trades on the

NYSE in September were block trades.

Nortel revised its outlook for optical equipment sales for the year to $10 billion from a previous $12 billion.

TheStreet.com

took a close look at the company's news in a

separate story.

Analysts

jumped on the stock and anything related, including fellow optical-networking leader

JDS Uniphase

(JDSU)

, which reports earnings tomorrow, as well as

Micron

(MU) - Get Report

, down 6.3%,

Applied Micro Circuits

(AMCC)

, down about 25%, and

Semtech

(SMTC) - Get Report

, 9% lower. JDS Uniphase, the most actively traded stock on the Nasdaq exchange this afternoon, was lately down 24.2% to $72.

SDL

(SDLI)

, which is being acquired by JDS Uniphase, fell a $85, or about 27%, to $231. Did you hear that one fall?

Still, no matter how bad the markets seem at first blush, there was still some good news out there.

Amazon.com

(AMZN) - Get Report

was jumping 16.9%, or $5, to $34.56, after the online retailer reported a narrower-than-expected loss. The company expressed optimism about the crucial fourth quarter (you don't need your Palm Pilot to figure out that the current quarter overlaps with the holiday season). In a separate story,

TheStreet.com

took a close look at what the

earnings mean for Amazon.

Amazon's positive vibes helped lift

TheStreet.com Internet Sector

index, but the index of dot-coms has lately become a victim of peer pressure from some of its other components and was lately off 1.1%.

CNet Networks

(CNET) - Get Report

, which was recently added to the index,

beat estimates and was also doing its best to bring up the sector with Amazon. It lately was up 11.4%, or $2.94, to $28.63.

Yahoo

(YHOO)

and

Lycos

(LCOS)

were helping to drag it lower, however.

Strength in good old defensive stocks was trying to counter weakness in techs and telecoms. Aircraft giant

Boeing

(BA) - Get Report

-- lately up 3.5% -- and financial company

TheStreet Recommends

J.P. Morgan

(JPM) - Get Report

-- up 1.8% -- were adding positive vibes to the Dow. Consumer companies

Johnson & Johnson

(JNJ) - Get Report

and

Procter & Gamble

(PG) - Get Report

were also strong.

Quick, name a company that can't seem to get any respect.

Did you guess

AT&T

(T) - Get Report

? It was down about 14% after it finally announced that it would break into four companies, each with its own common or tracking stock. AT&T also said that its earnings beat lowered estimates.

Merrill Lynch

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

WorldCom

(WCOM)

. WorldCom was down 5.3%.

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Sector Watch

The

Philadelphia Stock Exchange Semiconductor Index

that tracks the chip industry dropped 5.7%, reeling from Nortel and

Compaq's

(CPQ)

disappointing outlook.

Linear Technology

(LLTC)

, down 11.2%, and

Lattice Semiconductor

(LSCC) - Get Report

, 8.9% lower, were chip companies among the hardest hit.

Biotech stocks have fallen back into favor as a tech haven, and they were playing that role today. The

Nasdaq Biotechnology Index

was 1.6% higher.

Otherwise, investors were furiously throwing their money at defensive stocks they turn to when life with tech gets hairy. The

American Stock Exchange Pharmaceutical Index

that follows the drug sector was 2.1% higher, led by Johnson & Johnson, up 3.5%, or $3.25, to $94.88 and

American Home Products

(AHP)

which lately was up 1.7%.

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Bonds/Economy

The bond market has reversed course. The 10-year

Treasury note is at 100 18/32, off 11/32 to yield 5.673%. The 30

Treasury bond is at 107 3/32, off 21/32 and yielding 5.746%.

The

Mortgage Applications Survey

(

definition |

chart |

source

) for the week ended Oct. 20, released today, rose to 587.2 from 498.6 in the previous week. Mortgage refinancings continue to rise, which typically happens when rates fall, while the purchase index slipped to 298.7 from 311.1.

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