Nasdaq Takes Big Tumble

Heavy losses in the tech sector caused the index to post its third largest point drop in history.
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A massive selloff in the technology sector sent the

Nasdaq Composite Index

tumbling 3.3%, while

Advanced Micro Devices

(AMD) - Get Report

spit out some bad news shortly before the close.

AMD -- whose stock was halted at 18 15/16, down 2 on the day, late this afternoon -- said late today that based on a re-assessment of competitive conditions, the company could incur an operating loss in the first quarter. The current

First Call

22-analyst view sees the company earning 13 cents in the first quarter.

The Nasdaq Comp fell 82.87 to 2410.54, the third largest point drop in the index's history. Tech titans

Microsoft

(MSFT) - Get Report

fell 4.6%;

Intel

(INTC) - Get Report

dropped 6%; Cisco fell 5%; while

Dell

(DELL) - Get Report

also dropped 5%.

Elsewhere, the

Dow Jones Industrial Average

slumped 62.31, or 0.7%, to 9304.50. The

S&P 500

dropped 23.58, or 1.9%, to 1248.49. The

Russell 2000

gave up 5.95, or 1.4%, to 417.79

TheStreet.com Internet Sector

index fell 10.50, or 1.9%, to 538.42.

The 30-year Treasury bond was down 19/32 to 99 11/32, yielding 5.29%.

On the NYSE, decliners beat advancers 1,926 to 1,071 on 855 million shares. On the Nasdaq losers trumped winners 2,457 to 1,607 on 1.098 billion shares.

On the NYSE, 71 issues set new 52-week lows while 43 touched new highs. On the Nasdaq, 90 issues set new highs while new lows totaled 50.

Market data above are preliminary. Updated numbers and analysis will follow in the Market Roundup.

3:02 p.m.: Dow Inches into Positive Territory

The

Dow Jones Industrial Average

crawled into positive territory after being down nearly 92 points earlier. However, the

Nasdaq Composite Index

continued to suffer steep losses on the day.

The Dow was up 13 to 9379. The Nasdaq Comp was down 46 to 2447. The

S&P 500

was down 9 to 1263. The small-cap

Russell 2000

was down 4 to 420.

Not unexpectedly, the

Federal Reserve

did not move to a tightening bias at the Dec. 22

Federal Open Market Committee

meeting, according to minutes released today.

"The Committee believes that prospective developments are equally likely to warrant an increase or a decrease in the federal funds rate operating objective," the minutes said.

TheStreet.com Internet Sector

index was up 4 to 553.

The 30-year Treasury bond was down 22/32 to 99 8/32, yielding 5.30%.

The weakness in the bond market has weighed on stocks today, according to some market participants. Stock weakness -- particularly in the tech sector -- was blamed on the need for that sector of the market to pause in light of its recent dramatic runup.

The tech stocks have had a huge two-month runup and they're "catching their breath here," said Jay Suskind, head of institutional equity trading at

Ryan Beck

.

The online brokerage stocks were going nuts again today.

National Discount Brokers

(NDB)

was up 3/4, or 2%, to 38 3/8;

J.B. Oxford

(JBOH)

was up 6 3/8, or 53%, to 18 5/16 (and was most active on the

Nasdaq Stock Market

on volume of 27 million shares);

M.H. Meyerson

(MHMY)

was up 7 1/16, or 96%, to 14 9/16; and

Siebert Financial

(SIEB) - Get Report

was up 9 7/16, or 19%, to 59 3/16. On the flip side,

Ameritrade

(AMTD) - Get Report

was down 5 5/8, or 4%, to 123 1/2.

Suskind said the online brokerage stocks are just one more sector that's getting to a point of frothiness. He said that area of the market lately has been filled with day traders and "short squeezers."

On the

New York Stock Exchange

, decliners were beating advancers 1,813 to 1,131 on 678 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,327 to 1,654 on 870 million shares.

On the NYSE, 67 issues had set new 52-week lows while 40 had touched new highs. On the Nasdaq, 85 issues had set new highs while new lows totaled 35.

On the Big Board,

Advanced Micro Devices

(AMD) - Get Report

was most active, with 12 million shares changing hands. It was down 2 1/16, or 10%, to 18 7/8. Thomas Kurlak, semiconductor analyst at

Merrill Lynch

, downgraded AMD to near-term neutral from near-term accumulate. His long-term rating on the stock remained at accumulate.

2:03 p.m.: Nasdaq Remains Down Markedly

A renewed wave of selling sent the major market averages in the direction of their session lows before rebounding, while the tech-heavy

Nasdaq Composite Index

continued to suffer sharp losses.

The Nasdaq Comp was down 52 to 2441.

The

Dow Jones Industrial Average

was down 47 to 9320. The Dow's intraday low is 9274.89.

The

S&P 500

was down 16 to 1256. The

Russell 2000

was down 5 to 419.

TheStreet.com Internet Sector

index was down 3 to 546.

E*Trade

(EGRP)

once again says it has restored online trading. A spokesman for E*Trade says that starting at around 10:00 a.m. EST, it experienced a partial interuption of online trading. Soon after, E*Trade began to restore online trading to some customers and, as of 1:30 ET, all customers could trade online. This morning, E*Trade customers emailed

TheStreet.com

about problems trading and accessing account information. E*Trade's trading problems

yesterday carried over from a software malfunction Wednesday morning. The company's stock was last down 1/16 to 55 1/4.

Meanwhile, New York Attorney General

Eliot Spitzer

announced an inquiry into the online brokerage industry in response to customer complaints about trading delays and technology problems. He is sending letters to several online firms, asking them to provide information about their services. He said in a press release that he is seeking voluntary cooperation from the industry to resolve the problems and develop safety precautions. Friday, a questionnaire for online investors will be posted on the attorney general's

Web site .

Turning to Treasuries, the 30-year bond was down 26/32 to 99 4/32, yielding 5.31%. Treasuries tumbled in part on more strong economic data released this morning.

Looking ahead, tomorrow the much-anticipated January

employment report

is slated to be released. According to a

Reuters

survey, economists expect nonfarm payrolls to rise 135,000. Meanwhile, the minutes of the December

Federal Open Market Committee

meeting are slated to be released soon.

Market internals were poor.

On the

New York Stock Exchange

, decliners were beating advancers 1,877 to 1,010 on 568 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,289 to 1,548 on 746 million shares.

On the NYSE, 59 issues had set new 52-week lows while 37 had touched new highs. On the Nasdaq, 82 issues had set new highs while new lows totaled 32.

On the Big Board,

Advanced Micro Devices

(AMD) - Get Report

was most active, with 10 million shares changing hands. It was down 2 15/16, or 11%, to 18 5/8. Thomas Kurlak, semiconductor analyst at

Merrill Lynch

, downgraded AMD to near-term neutral from near-term accumulate. His long-term rating on the stock remained at accumulate.

On the Nasdaq, broker

J.B. Oxford

(JBOH)

was most active, with 26 million shares changing hands. It was up 6 15/16, or 58%, to 19.

Focus: IP Takeover of Union Camp Cleared

International Paper

(IP) - Get Report

said the

Justice Department

has completed its

Hart-Scott-Rodino

review of IP's proposed takeover of

Union Camp

(UCC) - Get Report

which should clear the way for a shareholder vote in late March and completion of the transaction on schedule.

The news lifted Purchase, N.Y.-based IP 3 1/8, or 8%, to 44 1/16, while Wayne, N.J.-based Union Camp jumped 3 3/4, or 6%, to 67 15/16. IP, a Dow component, was the best-performing member of the average.

Meanwhile, forest and paper product stocks were one of the bright spots in the market today. The

Philadelphia Stock Exchange Forest & Paper Products Index

has surged 3%.

On Nov. 24, IP said it would acquire Union Camp in a stock swap valued at $6.6 billion, including assumption of debt. The stock closed that day at 44. Union Camp on news of the deal that day surged 16 to close at 64 15/16.

--Amy Olmstead contributed to this report.

1:18 p.m.: Midday Musings: Wall Street Stays Cool Despite Harsh Selloff

11:59 a.m.: Stocks Continue Lower

The major market averages continued lower but were off their worst levels of the session as the

Nasdaq Composite Index

led on the downside, off 2%.

The Nasdaq Comp was down 47 to 2446. The

Dow Jones Industrial Average

was down 63 to 9304. The

S&P 500

was down 18 to 1255. The

Russell 2000

was down 4 to 420.

TheStreet.com Internet Sector

was down 2 to 547.

In the world of online trading, problems beset

E*Trade

(EGRP)

again today and pushed the stock lower. It was last down 3/8, or 1%, to 54 7/8.

In the Treasury market, the 30-year bond was down 1 3/32 to 98 27/32, yielding 5.33%. (For more on the fixed-income market, see today's early

Bond Focus.)

Meanwhile, some assisted-living stocks were getting shellacked.

BancBoston Robertson Stephens

suspended its ratings on

Alternative Living Services

(ALI)

,

Balanced Care

(BAL) - Get Report

,

CareMatrix

(CMD) - Get Report

and

Sunrise Assisted Living

(SNRZ)

on concerns over the potential impact of a

General Accounting Office

report on the industry slated to be released in April, which the firm says will likely be negative. The GAO is the investigative arm of Congress.

Alternative Living was down 14%; Balanced Care was down 24%; CareMatrix was off 17%; while Sunrise was down 11%.

On the

New York Stock Exchange

, decliners were beating advancers 1,791 to 939 on 377 million shares. On the Nasdaq losers were beating winners 2,110 to 1,380 on 497 million shares.

On the NYSE, 31 issues had set new 52-week lows while 49 had touched new highs. On the Nasdaq, 68 issues had set new highs while new lows totaled 24.

On the Big Board,

Advanced Micro Devices

(AMD) - Get Report

was most active, with 7 million shares changing hands. It was down 2 1/2, or 12%, to 18 7/16. More on AMD below.

On the Nasdaq,

J.B. Oxford

(JBOH)

was most active, with 20 million shares changing hands. It was up 9 3/16, or 77%, to 21 3/16.

Tech Focus

The tech indices were getting pummeled. The

Philadelphia Stock Exchange Computer Box Maker Index

was down 3%. The

Morgan Stanley High-Tech 35

was down 2%. The

Nasdaq 100

was down 2%.

The

Philadelphia Stock Exchange Semiconductor Index

was down 3%.

In semiconductorland today, Thomas Kurlak, semiconductor analyst at

Merrill Lynch

, downgraded AMD to near-term neutral from near-term accumulate. His long-term rating on the stock remained at accumulate. He also lowered his earnings estimates for the first quarter and full year of 1999 on

Intel

(INTC) - Get Report

.

11:08 a.m.: Nasdaq Takes a Tumble

Stocks were lower, with the selloff taking the biggest toll on the

Nasdaq Composite Index

, which has tumbled 2%.

The Nasdaq Comp was down 50 to 2443.

The

Dow Jones Industrial Average

was down 32 to 9335. The

S&P 500

was down 13 to 1259. The

Russell 2000

was down 3 to 420.

TheStreet.com Internet Sector

index was down 7 to 542.

Although John Roque, senior analyst at

Arnhold & S. Bleichroeder

, has an overall bullish stance on stocks, there's a few negatives out there to be aware of and concerned about.

First, utilities have corrected sharply enough for him to think the market could suffer a correction. In a note today he wrote: "Because every time since 1933 that the utilities have had a bearish break, the broader market has suffered thereafter. The market hasn't necessarily suffered a bearish break as a result, but a sizable and certainly uncomfortable selloff nonetheless."

The poor performance of bonds lately also is a concern. He said the 30-year Treasury bond's yield rising above 5.35% would be a negative while a rise above 5.42% would be a major concern for stocks.

The long bond was down 1 4/32 to 98 27/32, yielding 5.33%.

Poor market internals like cumulative breadth and the disappeared number of new highs are also troubling in Roque's view.

Semiconductor stocks were taking a beating. The

Philadelphia Stock Exchange Semiconductor Index

was down 3%. Today, Thomas Kurlak, semiconductor analyst at

Merrill Lynch

, downgraded

Advanced Micro Devices

(AMD) - Get Report

to near-term neutral from near-term accumulate. His long-term rating on the stock remained at accumulate. He also lowered his earnings estimates for the first quarter and full year of 1999 on

Intel

(INTC) - Get Report

.

In other news, Doug Cliggott,

J.P. Morgan

strategist, cut his recommended allocation of stocks in a model portfolio to 50% from 60%. Cliggott recommended upping cash to 25% from 15%, while his recommendation for bonds remained at 25%.

On the

New York Stock Exchange

, decliners were beating advancers 1,616 to 904 on 244 million shares. On the

Nasdaq Stock Market

, losers were beating winners 1,867 to 1,270 on 346 million shares.

On the NYSE, 28 issues had set new 52-week highs while 29 had touched new lows. On the Nasdaq, 67 issues had set new highs while new lows totaled 16.

E*Trade Tech Trouble Continues

E*Trade's

(EGRP)

tech trouble might not be over yet.

As customers mulled over E*Trade's online apology about yesterday's trading problems, some were also finding they couldn't trade this morning, according to emails to

TheStreet.com

. At the log-in page, a notice read: "Access to some areas of your account may be temporarily unavailable. If you would like to place a trade please call Customer Service at 1 800 786-2575." There was also a "Service Unavailable" notice on the trading page.

Yesterday, from about 10:15 to 11:30 a.m. EST, no customers could trade online at E*Trade. For the remainder of the day, some customers continued to have problems. In addition, the automated phone trading system was also down for about 15 minutes. E*Trade said the problem was the result of a software change Tuesday night that malfunctioned after trading started.

In its letter of apology posted on the site, E*Trade said: "We at E*TRADE would like to apologize for the interruption in electronic trading service that occurred on Wednesday. As a pioneer and innovator in online investing, we continue to be committed to the goal of being the leader in electronic personal financial services.

"At E*TRADE, we always strive to enhance the quality of products and services we deliver to our customers. We have built one of the most advanced and reliable technology, service and support infrastructures in our industry. We know, as most of you know, that technology is imperfect. That does not, however, deter us from our commitment to being the best."

E*Trade did not immediatly return calls for comment, although a spokeswoman said earlier today that the problem had been worked through.

E*Trade's stock last traded down 1 7/8 to 53 7/16.

--

Amy Olmstead

9:58 a.m.: Stocks Open Mixed

Stocks were mixed early on while the

Bank of England

dropped its key short-term interest rate by 50 basis points, a move that sent European stocks soaring.

The

Dow Jones Industrial Average

was up 16 to 9383. The

S&P 500

was down 3 to 1269. The

Nasdaq Composite Index

was down 15 to 2478. The

Russell 2000

was down fractionally at 424.

TheStreet.com Internet Sector

was up 2 to 551.

The 30-year Treasury bond was down 22/32 to 99 9/32, yielding 5.30%.

Most Up at Open -- NYSE

Nokia (NOK.A) , up 3 1/8 to 140

.

Most Up at Open -- Nasdaq

Trimeris (TRMS) , up 5 1/4 to 26 1/4

: The company said it received fast-track status from the

Food and Drug Administration

for its HIV T-20, the first of a new class of HIV drugs.

Most Down at Open -- NYSE

Lucent (LU) , down 2 3/4 to 107 1/4

.

Most Down at Open -- Nasdaq

Boron LePore (BLPG) , down 13 9/16 to 15 3/16

.