Market Update: Stocks Sink Into Red in Afternoon Action; priceline Off Over 40% - TheStreet

The Dow Jones Industrial Average and Nasdaq Composite Index had been frolicking on the upside early in the afternoon, but just jumped, hand in hand into the red.

They've been up and down all day, showing little conviction to either the positive or negative side and hovering close to the break-even line.

Eastman Kodak

(EK)

kept its lead position as the biggest drag on the Dow, taking about 25 points away from the index. It was also getting kicked lower by

Caterpillar

(CAT) - Get Report

and

Microsoft

(MSFT) - Get Report

, each with more than 10 points to the negative.

Hewlett-Packard

(HWP)

was adding almost 26 points to the Dow.

United Technologies

and

ExxonMobil

(XOM) - Get Report

were also contributing to the Dow, adding a total of about 25 points.

Meanwhile on the Nasdaq,

priceline.com

(PCLN)

was getting stomped, down 41.7% to $10.88, after it warned that its third-quarter revenue would

fall short of estimates. Fellow Nasdaq component and Internet stock

Yahoo!

(YHOO)

was down 12.9% to $89.25.

With all of the

earnings warnings in the past couple weeks, it was nice to get some good news from

3Com

(COMS)

. It reported a far narrower-than-expected loss post-close last night, and got some positive revisions on 2001 loss estimates from

Lehman Brothers

and

Goldman Sachs

. The stock was lately soaring, up 20.2% to $16.75.

Two of 3Com's primary competitors,

Lucent

(LU)

, off 5.6% to $28.81, and

Nortel

(NT)

, down 7.9% to $60.19, were also getting battered.

Also,

Motorola

(MOT)

was lately falling about 5.4% to $28.44, on rumors of an earnings shortfall. The company said it wouldn't change its earnings expectations and declined to comment on the speculation and has since started to edge up.

Flying high today was

Southern Energy

(SOE)

, which made its debut on the Big Board today. It was priced at $22, but was lately up almost 30% to $28.63.

Sector Watch

Semiconductors were making another attempt at a comeback this morning. The sector has been under water of late on concern that chip demand is slowing. The

Philadelphia Stock Exchange Semiconductor Index

had lately turned south, off 0.2%.

Altera

(ALTR) - Get Report

,

Micron

(MU) - Get Report

and

Xilinx

(XLNX) - Get Report

were moving higher on the day.

Energy stocks were rallying, with the

American Stock Exchange Oil & Gas Index

up 1.8% and the

Philadelphia Stock Exchange Oil Service Index

1.7% higher. Also, gold was shining this afternoon. The

Philadelphia Stock Exchange Gold and Silver Index

rose 4.1%.

Brokerage stocks were slipping slightly, and banks stocks were down following news of

FleetBoston's

(FBF)

planned acquisition. The

American Stock Exchange Broker/Dealer Index

was down 9.2%, while the

Philadelphia Stock Exchange/KBW Bank Index

was 0.8% lower.

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Bonds/Economy

Bonds are under pressure in part because a

report in today's

Washington Post

says an error in calculating the

Consumer Price Index

(

definition |

chart |

source

) resulted in it being understated.

The Bureau of Labor Statistics confirmed that it will revise CPI data for January to August, and that the increase over that period will be revised to 2.7% from 2.6%. The bureau will hold a briefing on the matter on Thursday at 9:30 a.m. EDT.The

Washington Post

article says the correction is likely to add 0.1 to 0.3 percentage points to the overall and core inflation rates. Overall CPI inflation was running at a rate of 3.4% in August, while core CPI inflation, which excludes food and energy, was running at 2.5%, nearly a two-year high.

A higher inflation rate devalues bonds because it erodes the value of the fixed interest payments they make.

The benchmark 10-year Treasury note lately was down 6/32 at 99 13/32, lifting its yield to 5.829%.

The BLS said the error was in the portion of the report that measures housing costs, and that software was responsible.

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