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Market Update: Stocks Stink as Warnings Rattle Market

<LI>Foundry Networks plunges 55% after earnings warning.</LI> <LI>Nasdaq, off lows of the morning, at 2400.</LI>
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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


, 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


(CSCO) - Get Cisco Systems, Inc. Report


Extreme Networks

(EXTR) - Get Extreme Networks, Inc. Report


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(JNPR) - Get Juniper Networks, Inc. Report


Foundry got smacked with downgrades and negative notes from

ABN Amro


Robertson Stephens


SG Cowen


Merrill Lynch

, which also cut Cisco. SG Cowen downgraded Extreme.


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reported earnings that


surpassed estimates. The Internet business services company lately was up 6.7%.

Software maker

Siebel Systems


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

(JBL) - Get Jabil Inc. Report

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.


Big Boarder athletic shoe and apparel maker


(NKE) - Get NIKE, Inc. Class B Report

was up 1.8% after it reported second-quarter earnings that were

in line with estimates.


(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%.

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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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 |


) rose more than expected in November to 1.562 million from 1.528 million in October. Economists polled by


had forecast a rate of 1.536 million.

In other economic news, the weekly

Mortgage Applications Survey


definition |

chart |


) 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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