Market Update: Stocks Stink as Warnings Rattle Market
The market loves to overreact, and that's what it seemed to be doing today.
Lately, the major stock market indices were coming off lows, but the
Dow Jones Industrial Average and
Nasdaq Composite Index were still firmly in the red.
Yesterday's announcement by the
Fed that it wasn't going to cut interest rates caused the market to take a dive. That freefall continued into today's session and was fueled by some (surprise!) earnings warnings and negative research notes. The Fed did, however, say the risks of recession now outweigh the risks of inflation.
On the Nasdaq, a big weight was
Foundry Networks
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, which makes Internet networking products. The company was plunging 55% because it warned it would miss earnings. Its announcement sparked concern in the network equipment market, putting pressure on
Cisco
(CSCO) - Get Cisco Systems, Inc. Report
,
Extreme Networks
(EXTR) - Get Extreme Networks, Inc. Report
and
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Juniper
(JNPR) - Get Juniper Networks, Inc. Report
.
Foundry got smacked with downgrades and negative notes from
ABN Amro
,
Robertson Stephens
,
SG Cowen
and
Merrill Lynch
, which also cut Cisco. SG Cowen downgraded Extreme.
Manugistics
(MANU) - Get Manchester United Plc Class A Report
reported earnings that
actually
surpassed estimates. The Internet business services company lately was up 6.7%.
Software maker
Siebel Systems
(SEBL)
was getting back some of what it lost yesterday after an analyst note from
Credit Suisse First Boston
questioned the company's growth. It lately was up 4.8%.
Elsewhere in tech land,
Jabil Circuit
was plunging 22.7% after it reported
weaker-than-expected earnings. As is often the case after a bad corporate announcement, it received a series of tongue-lashings. The busy analysts?
Goldman Sachs
, Merrill,
Lehman Brothers
and CSFB.
Non-tech
Big Boarder athletic shoe and apparel maker
Nike
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was up 1.8% after it reported second-quarter earnings that were
in line with estimates.
IBM
(IBM) - Get International Business Machines Corporation Report
was suffering -- and dragging the Dow with it. Merrill downgraded Big Blue this morning to neutral from accumulate. It lately was falling 4.4%.
TheStreet.com
wrote a
separate story that looks at the IBM and other actions from Merrill that hurt today's market.
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Sector Watch
Energy-related stocks were in the dumps today as energy prices slide off their highs. The
American Stock Exchange Oil & Gas Index
was 1.2% lower and the
Philadelphia Stock Exchange Oil Service Index
was off 3.3%.
Transportation stocks were also suffering today. The
Dow Jones Transportation Average
was dropping 3%, while the
American Stock Exchange Airline Index
was sliding 0.9%.
Tech-related sectors were all lower, including the
Philadelphia Stock Exchange Semiconductor Index
, the
Philadelphia Stock Exchange Computer Box Maker Index
and the
Morgan Stanley High-Tech 35
.
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Bonds/Economy
Treasury prices are sharply higher as investors worry that yesterday's decision by the Fed to leave interest rates unchanged will cause economic growth to slow further. That possibility is weighing on stock prices, which is helping the bond market.
The benchmark 10-year
Treasury note lately was up 19/32 to 104 26/32, pushing its yield lower to 5.113%. Prices and yields move in the opposite direction.
Bond prices were rising despite signs of strength in the housing sector.
Housing starts
(
definition |
chart |
source
) rose more than expected in November to 1.562 million from 1.528 million in October. Economists polled by
Reuters
had forecast a rate of 1.536 million.
In other economic news, the weekly
Mortgage Applications Survey
(
definition |
chart |
source
) detected an increase in refinancing and a decrease in new mortgage activity as mortgage interest rates fell to new lows for the year. The Refinancing Index rose to 777.2, the highest since May 1999. The Purchase Index fell to 302.2.
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