Stop, drop and cover -- the market is falling.

Lately, the

Dow Jones Industrial Average and the

Nasdaq Composite Index were chalking up triple-digit losses, but were off session lows.

The major indices were taking a bruising after banking worries resurfaced on top of economic news that came in unsettlingly better than expected.

Earlier today the country's biggest bank,

Bank of America

(BAC) - Get Bank of America Corp Report

, quashed rumors that it would be hurt by a line of credit drawn by California utilities and large losses from derivatives trading. But investors disbelieved, sending the stock and the market tumbling.

Trading in Bank of America shares was temporarily halted just after the opening bell, pending news from the bank. In its announcement, the bank asserted that it does not see any significant derivative losses, that it remains comfortable with its 2001 credit quality guidance and that it has seen no other significant trading losses.

Last month, Bank of America announced that it would miss fourth-quarter estimates, in part because of loan losses. In November, it said loan losses would double in the quarter due to problems with a large corporate loan that analysts attributed to troubled consumer products maker

Sunbeam

(SOC)

. So, new rumors about the bank getting hurt by the bankruptcy-heading California utilities bode nothing but ill for the institution, which was lately falling 8%.

The fear firing the selloff in financials is that the

Fed's surprise cut in interest rates Wednesday was engineered to bail out the ailing financial sector. Concerns over weakening credit quality and trading losses have put pressure on many of the financial giants lately. Investors are particularly worried about the aforementioned utility company debt, given California's continuing power woes.

Financials were getting punished, with blue-chips

J.P. Morgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

down 6.1% and

Citigroup

(C) - Get Citigroup Inc. Report

off 3.4%. The

American Stock Exchange Securities Broker/Dealer Index

was off 3.4% as well, and the Philadelphia Stock Exchange/KBW Bank Index was 3.6% lower.

The euphoria induced by

Greenspan's gang's

rate cut was nowhere to be found today, especially in tech, where such big-cap names as

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

,

JDS Uniphase

(JDSU)

and

Oracle

(ORCL) - Get Oracle Corporation Report

were getting killed. Cisco was down 9.3%, JDS Uniphase, off 8.6%, and Oracle slid 5.4%.

Also, more bad news on the earnings front with Internet consulting firm

Sapient

(SAPE)

warning that its unaudited fourth-quarter earnings were 16% short of estimates. In recent trading, it was off 10.4% to $13.44.

And

Next Level Communications

(NXTV)

, a communications-equipment maker, came out last night and cut its 2001 growth outlook. It was falling 4.9% to $26.94.

W.R. Hambrecht

followed up the bad news by serving up downgrades for both.

Banc of America Securities

was involved in some other bad news on the Street. The firm slashed chipmaker

Applied Micro Circuits'

(AMCC)

price target to $120 from $160 because of volatile market capitalization trends. The stock was 14.7% lower to $62.63.

Lehman Brothers

lowered estimates on

3M

(MMM) - Get 3M Company Report

, making it the worst performing component on the Dow. It was taking more than 40 points off the blue-chip index.

Alcoa's

(AA) - Get Alcoa Corp. Report

estimates were also cut, but the aluminum giant wasn't feeling it nearly as badly. It was off only 2% to $33.12.

Other blue-chips on the cutting board were discount retailing giant

Wal-Mart

(WMT) - Get Walmart Inc. Report

, which was trimmed by

Robertson Stephens

. PC maker

Hewlett-Packard

(HWP)

got double-whammied by

UBS Warburg

and

Goldman Sachs

.

Goldman also lowered its estimates for

IBM

(IBM) - Get International Business Machines (IBM) Report

. 3M was off 5.9%, Alcoa was falling 1.9%, Wal-Mart was down 3.8%, and H-P was falling 9.4%. IBM was up slightly, higher by 0.3%.

Today's

employment report was friendlier than some were predicting. Unemployment remained even with the previous month at 4%, despite forecasts it would rise to 4.1%. New nonfarm payrolls rose to 105,000, just above forecasts of 102,000 and a bit of a rebound from November's surprisingly low 94,000. But growth in average hourly earnings came out just above forecasts at 0.4%, indicating that wage inflation continues to grow. Economists were expecting 0.3%.

TheStreet.com

wrote a separate story about the areas of

weakness in the report.

Back to top

Sector Watch

Investors were getting defensive, flocking to safety in the form of drugs and tobacco. Both sectors have been suffering the past couple days as money flowed in to riskier technology stocks, but today they were leading the parade. The

American Stock Exchange Pharmaceutical Index

was 0.6% higher, while the

TheStreet Recommends

American Stock Exchange Tobacco Index

was rising 0.4%.

Energy stocks were back in favor with the

American Stock Exchange Natural Gas Index

up 2.6%, the

Chicago Board Options Exchange Oil Index

up 0.3% and the

Dow Jones Utility Average

up 0.8%.

Internet, biotech, semiconductor and PC stocks were all tanking.

TheStreet.com Internet Sector

index was down 7.5%. The

Nasdaq Biotechnology Index

was tumbling 8.4%, the

Philadelphia Stock Exchange Semiconductor Index

was descending 5.2%, while the

Philadelphia Stock Exchange Computer Box Maker Index

was dropping 3.6%.

Back to top

>Bonds/Economy

Treasury notes are selling higher as traders remain convinced the

Federal Reserve will trim interest rates once again by the end of the month. The long bond, after falling earlier in the session, has checked its slide. It should finish higher later this afternoon if its daily drift over the past week holds true. Treasury yields are near their two-year lows.

The unemployment data released today was not as bad as feared, but it didn't change the market's mood. Some analysts are guessing that the currently available payroll and unemployment information will be revised and next month's report will be a lot worse. The morning didn't go by without a flutter though. Misleading news about the financial services sector being exposed to defaulting California utilities supplied the tension. The equity market fell sharply and shorter Treasuries shot upward until Bank of America denied the rumor.

The benchmark 10-year

Treasury note lately was up 17/32 to 105 28/32, lowering its yield to 4.972%.

In economic news, the

employment report

(

definition |

chart |

source

) had nonfarm payrolls, which are new jobs created during the month, rising by 105,000 in December. The government accounted for more than half of this growth, while privately held manufacturers continued to lose jobs. The unemployment rate remains at 4%, slightly better than expected. Economists polled by

Reuters

had forecast it at 4.1%.

The augmented unemployment rate rose 7% in December as compared to 6.9% the previous month. It differs from the regular unemployment number by also counting those of the unemployed who are not actively looking for a job but will begin working again if offered one.

The average hourly earnings increased 0.4%, little more than expected, as the annual rate edged up to 4.2% from 4.1%.

New home sales

(

definition |

chart |

source

) fell 2.2% to 909,000 in November, a little more than predicted, from 929,000 in October. Due to the low mortgage rates, economists had expected the number at 913,000. It has now declined for the third consecutive month but remains well above the level it had dipped to earlier last summer.

Back to top

Sector Watch

Investors were getting defensive, flocking to safety in the form of drugs and tobacco. Both sectors have been suffering the past couple days as money flowed in to riskier technology stocks, but today they were leading the parade. The

American Stock Exchange Pharmaceutical Index

was a bit off, though, lately down 0.2%, while the

American Stock Exchange Tobacco Index

was rising by less than it had, up by 0.2%.

Energy stocks were back in favor with the

American Stock Exchange Natural Gas Index

up 2.5%, the

Chicago Board Options Exchange Oil Index

up 1.8%. The

Dow Jones Utility Average's

gains were taken away by fears over California's energy woes, though, and lately it was down 0.2%.

Internet, biotech, semiconductor and PC stocks were all tanking.

TheStreet.com Internet Sector

index was down 8.9%. The

Nasdaq Biotechnology Index

was tumbling 9.4%, the

Philadelphia Stock Exchange Semiconductor Index

was descending 5.9%, while the

Philadelphia Stock Exchange Computer Box Maker Index

was dropping 4.8%.

Back to top

>Bonds/Economy

Treasury notes were selling higher as traders believe the

Federal Reserve will trim interest rates again by the end of the month. The long bond, after falling earlier in the session, had checked its slide. It should finish higher today if its daily drift over the past week holds true. Treasury yields are near their two-year lows.

The unemployment data released today was not as bad as feared, but it didn't change the market's mood -- because the longer-term trend of many less new jobs being created is more significant. And some analysts are guessing that the currently available payroll and unemployment information will be revised and next month's report will be a lot worse. The morning didn't go by without a flutter though. Rumors about the financial services sector being exposed to defaulting California utilities supplied the tension. The equity market fell sharply and shorter Treasuries shot upward, despite the Bank of America denying the rumor.

The benchmark 10-year

Treasury note lately was up 24/32 to 106 3/32, lowering its yield to 4.945%.

In economic news, the

employment report

(

definition |

chart |

source

) had nonfarm payrolls, which are new jobs created during the month, rising by 105,000 in December. But the government accounted for more than half of this growth, while privately held manufacturers continued to lose jobs. The unemployment rate remains at 4%, slightly better than expected. Economists polled by

Reuters

had forecast it at 4.1%.

The augmented unemployment rate rose 7% in December as compared to 6.9% the previous month. It differs from the regular unemployment number by also counting those unemployed people who are not actively looking for a job but would begin working again if offered one.

The average hourly earnings increased 0.4%, little more than expected, as the annual rate edged up to 4.2% from 4.1%.

New home sales

(

definition |

chart |

source

) fell 2.2% to 909,000 in November, a little more than predicted, from 929,000 in October. Due to the low mortgage rates, economists had expected the number at 913,000. It has now declined for the third consecutive month, but remains well above the level it had dipped to earlier last summer.

Back to top