Tech Collapse Reflects Growing Unease on Wall Street

Investors are skittish, and every little noise made them jump away from big tech stocks today.
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It was a mess on Wall Street today: The bond market was jackknifed on the wrong side of Route 5.25 (percent, that is), while sellers jammed the exits in a rush to get out of recently beloved technology stocks. All major proxies ended with substantial losses, but some investors avoided the pile-up by taking back routes that have been little used of late, into commodities and other economically sensitive areas.

The

Federal Reserve

unanimously decided to maintain a neutral stance at its December meeting rather than switch to a tightening bias as some predicted, according to the

minutes released today. Still, the bond market continues to act as if higher rates are in the offing. A drop in initial jobless claims and rumblings the January employment report will be strong further pressured fixed-income securities. The price of the 30-year Treasury bond fell 19/32 to 99 11/32, its yield rising to 5.29%.

The

Nasdaq Composite Index

could not extricate itself from an early slide and closed at its lows of the session, off 83.34, or 3.4%, to 2410.07. The point decline is the third-largest in Nasdaq history.

The index was saddled by weakness in bellwethers such as

Microsoft

(MSFT) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

,

Cisco

(CSCO) - Get Report

and

Dell

(DELL) - Get Report

. The

Nasdaq 100

fell 4.3%.

Intel

(INTC) - Get Report

was also a major hindrance, falling 6.2% after

Merrill Lynch

chip analyst Thomas Kurlak cut earning estimates for the first quarter and full-year 1999. Kurlak also downgraded

Advanced Micro Devices

(AMD) - Get Report

, which fell 9.9% before being halted; late in the day the chip-maker said it could suffer a loss in its fiscal first-quarter. The

Philadelphia Stock Exchange Semiconductor Index

shed 5.1%.

"The Advanced Micro halt, obviously that sealed the fate of the over-the-counter market, particularly the techs," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee. "But it wasn't the panic selling we're used to seeing. It was primarily more of a gradual movement, although we did pick up in the last hour."

"No one expects the market to go up every day," Herrick added. "If anything this could be healthy if it shakes out weaker holders."

The trader said there was no single catalyst for the selling but said some "cautionary comments" from the brokerages are "sending some fear into investors." For example,

Lehman Brothers

declared that

Lucent

(LU)

"continues to appear ahead of itself," and the stock fell 5.6%.

Other Big Board tech stalwarts such as

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

got hammered as well; the

Morgan Stanley High-Tech 35

lost 3.6%

The

Dow Jones Industrial Average

overcame a mid-morning decline to as low as 9274.89 and climbed as high as 9397.96. But the blue-chip proxy closed down 62.31, or 0.7%, to 9304.50, thanks largely to weakness in its tech components,

AT&T

(T) - Get Report

and financial giant

J.P. Morgan

(JPM) - Get Report

.

International Paper

(IP) - Get Report

and

Alcoa

(AA) - Get Report

led the Dow's gainers.

'No one expects the market to go up every day,' said Robert W. Baird's Jim Herrick. 'If anything this could be healthy if it shakes out weaker holders.'

Like the Dow, the

S&P 500

could not overcome the weakness in technology and financials, closing down 23.58, or 1.9%, to 1248.59. The index avoided wider losses largely to strength in a variety of commodities; the

Morgan Stanley Cyclical Index

rose 1%, the

American Stock Exchange Forest & Paper Products Index

gained 2.1%, while the

Philadelphia Stock Exchange Gold & Silver Index

surged 5.3%.

Copper producers were standouts after

Morgan Stanley Dean Witter

upped ratings on several big names. To wit,

Asarco

(AR) - Get Report

rose 11.1%,

Cyprus Amax Minerals

(CYM)

gained 13.5%, and

Phelps Dodge

(PD) - Get Report

climbed 10.5%.

The

Russell 2000

shed 5.95, or 1.4%, to 417.79 while

TheStreet.com Internet Sector

index closed down 10.50, or 1.9%, to 538.42.

With Internet bellwethers were largely subdued, small online brokers enjoyed a second-straight day of runaway gains. Gains emerged despite (or because of?) another shutdown at

E*Trade Group

(EGRP)

and word New York Attorney General

Eliot Spitzer

began an inquiry into the online brokerage industry.

M.H. Meyerson

(MHMY)

gained 67% and

J.B. Oxford

(JBOH)

climbed another 33%. However,

Siebert Financial

(SIEB) - Get Report

closed down 12.6% at 43 1/4 after rising as high as 70 5/8 intraday.

In

New York Stock Exchange

action, 854.5 million shares traded while declining stocks led advancers 1,926 to 1,071. In

Nasdaq Stock Market

activity, losers led 2,455 to 1,610 on 1.106 billion shares. New 52-week lows led new highs 71 to 43 on the Big Board while new highs led 90 to 50 in over-the-counter trading.

'Still in a Struggle'

"The market is still in a struggle," said Greg Nie, chief technical analyst at

Everen Securities

in Chicago. "Neither bulls or bears have a strong grip on tape action. Today was a mixed day again and not necessarily the end of the world."

Nie submitted (for your inspection) a "gradually lengthening" list of now-familiar negatives, including "horrible breadth," the October peak of the

Dow Jones Utility Average

, the growth of stocks at 52-week lows and "rapidly rising" interest rates.

However, the technical picture remains mixed (vs. outright negative) because "weakness is still generally accompanied by average and/or contracting volume," he said. Such was the case today as NYSE volume barely eclipsed the 1999 daily average of 845 million shares.

On a "pure judgment call, it doesn't strike me market participants are ready to embrace this list of negatives and turn defensive," Nie said. "At the same time, it's probably going to take the development of an oversold condition -- which we're not at yet -- to get a normal spot to build some momentum and then follow-through is critical."

Only if the Dow breaks its 200-day moving average around 8800 would he expect technical negatives "to shake more market participants and trigger a 5% to 10% selloff from there, especially if the break came on expanding volume."

Among other indices, the

Dow Jones Transportation Average

rose 21.80, or 0.7%, to 3247.14; the Dow utilities slid 3.66, or 1.2%, to 291.29; and the

American Stock Exchange Composite Index

fell 6.15, or 0.9%, to 707.12.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 60.40, or 0.9%, to 6661.10 and the

Mexican Stock Exchange IPC Index

dropped 47.01, or 1.2%, to 4013.55.

Thursday's Company Report

By Heather Moore
Staff Reporter

(

Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified

.)

General Electric's

(GE) - Get Report

NBC

network may be close to buying a stake in

Lycos

(LCOS)

, according to

The Industry Standard

. NBC would likely buy about 35% of Lycos, and

Snap!

-- the

CNet

(CNET) - Get Report

-run portal 60% owned by NBC -- would probably merge with Lycos, the

Standard

said.

The story ran after the close of trading. During the session, Lycos fell 1 1/8 to 129 3/8, CNet lost 5 15/16 to 137 15/16 and GE gave up 2 3/4 to 100 1/8.

As noted above, Advanced Micro Devices tanked after Merrill Lynch's Thomas Kurlak downgraded the chipmaker to neutral from accumulate. The downgrade came a day after AMD backed out of an appearance at the

NationsBanc Montgomery Securities Technology Week Conference

last night. The company also warned shortly before the closing bell of a first-quarter loss. The 22-analyst forecast called for earnings of 13 cents a share vs. the year-ago loss of 39 cents. The stock closed down 9.9% before being halted by the New York Stock Exchange around 3:15 p.m. and by the Nasdaq Stock Exchange around 3:20. The stock traded around 3200 shares on the

Boston Stock Exchange

to 18 15/16, down 9.6%, around 4:05 before an OTC resumption around 4:30.

E*Trade shaved off 2 to 53 1/2 after a second day of service outages while several other online brokers -- especially the small ones -- soared. J.B. Oxford jumped 3 15/16, or 33%, to an all-time high of 15 7/8; M.H. Meyerson jumped 4 15/16, or 67%, to an all-time high of 12 3/8. Still others returned recent power gains:

National Discount Brokers Group

(NDB)

sliced off 8 5/8, or 22.9%, to 29; Siebert Financial sliced off 6 1/4, or 12.6%, to 43 1/4.

As mentioned earlier, 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. On Friday, a questionnaire for online investors with be posted on the attorney general's

Web site.

Mergers, acquisitions and joint ventures

Ciena

(CIEN) - Get Report

popped 2 1/16, or 8.9%, to 25 5/16 on more takeover speculation.

International Paper lifted 2 5/8, or 6.3%, to 44 3/16 after saying the

Justice Department

completed its Hart-Scott-Rodino review of the company'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. Union Camp took in 3 7/16, or 5.4%, to 67 5/8.

Earnings/revenue reports and previews

Retailers had a mix reaction to largely positive January same-store sales. Here's a sampling:

  • Dayton Hudson (DH) rose 1 9/16 to an all-time high of 65 3/16 on sales up 9.6%.
  • J.C. Penney (JCP) - Get Report dropped 3/8 to 40 3/16 on sales down 0.1%.
  • Kmart (KM) dropped 1/4 to 17 5/8 despite sales up 8.5%.
  • Sears (S) - Get Report dropped 3/16 to 40 5/16 despite sales up 2.6%.
  • Tandy (TAN) - Get Report rose 2 to 55 1/2 after saying its Radio Shack January same-store sales rose 12%. The company also said it expects to report earnings up 15% to 20% a year for the next three years, to announce an audio-video partner in a few months and to begin Internet sales this June.
  • Wal-Mart (WMT) - Get Report dropped 2 to 83 3/4 despite sales up 10.3%.

Boron LePore

(BLPG)

plunged 12 5/8, or 43.9%, to an all-time low of 16 1/8 after posting fourth-quarter earnings of 24 cents a share, a penny shy of the four-analyst estimate but up from 16 cents a year earlier.

Cerner

(CERN) - Get Report

sloughed off 7 1/8, or 29.7%, to an annual low of 16 15/16 despite posting fourth-quarter earnings of 24 cents a share

last night, a penny ahead of the 24-analyst estimate and up from 16 cents a year ago. Something the company said must not have sat well with analysts; today,

Bear Stearns

,

BT Alex. Brown

, Merrill Lynch,

Goldman Sachs

and

ING Baring Furman Selz

separately cut recommendations. In sympathy,

Quadramed

(QMDC)

lost 3 15/16, or 14.8%, to 22 7/8 and

McKesson HBOC

(MCK) - Get Report

lost 7 5/8, or 10.5%, to 65.

Fort James

(FJ)

lowered 4 7/8, or 13.8%, to 30 3/8 although its fourth-quarter earnings of 63 cents a share were a penny ahead of the 11-analyst consensus and up from 48 cents a year ago.

W.R. Grace

(GRA) - Get Report

took in 11/16 to 14 11/16 after posting fourth-quarter earnings of 33 cents a share, excluding one-time charges, three cents better than the four-analyst estimate. A year ago, the company earned 90 cents a share.

Honeywell

(HON) - Get Report

advanced 3 1/16 to 71 1/2 after saying it expects 1999 earnings to rise 11% to 13% to $4.95 to $5.05 a share. The 12-analyst outlook calls for $4.98.

IXC Communications

(IIXC)

shot up 12 13/16, or 38.9%, to 46 1/4 after reporting a fourth-quarter loss of $1.17 a share, wider than the 99-cent loss of a year ago but better than the $1.59 shortfall of the 11-analyst consensus. The company said it has hired Morgan Stanley Dean Witter to help it explore strategic alternatives.

JetForm

(FORMF)

plummeted 5 9/32, or 46.9%, to an annual low of 6 after warning it expects to report a third-quarter loss of around 36 cents a share vs. a profit of 36 cents a year ago. The six-analyst consensus was for earnings of 13 cents a share.

Lincoln Electric

(LECO) - Get Report

let go of 1 to 21 3/8 after posting fourth-quarter earnings of 44 cents a share, up from 41 cents a year ago but a penny shy of the four-analyst consensus.

Maytag

(MYG)

gave up 3 7/16, or 5.5%, to 59 5/16 despite posting fourth-quarter earnings of 75 cents a share, up from the year-ago 54 cents, both excluding items. Maytag beat the seven-analyst view of 71 cents.

Orbital Sciences

(ORB)

tumbled 4 1/4, or 11%, to 34 1/2 after warning it sees fourth-quarter earnings falling below the eight-analyst view of 23 cents a share. A year ago, the company earned 18 cents.

OSI Systems

(OSIS) - Get Report

dwindled 1 11/16, or 17.1%, to 8 3/8 after posting second-quarter earnings of 20 cents a share, 2 cents shy of the three-analyst view and down from 24 cents a year ago.

Timberland

(TBL)

hopped 5 3/8, or 10.5%, to 56 11/16 after posting fourth-quarter earnings of $1.80 a share, up from $1.48 a year ago and 14 cents better than the two-analyst average. BT Alex. Brown upped its recommendation to buy from market performer.

World Color Press

(WRC)

vaulted 1 11/16, or 6.9%, to 26 after posting fourth-quarter profits of 63 cents per share, a penny better than the eight-analyst consensus and up from 62 cents a year ago. The company said it expects to double its acquisition activities in 1999.

In other earnings news:

Offerings and stock actions

Perot Systems

(PER) - Get Report

enjoyed a third day of robust gains since coming public, rising 4 3/16, or 6.8%, to 66 1/16.

Analyst actions

A host of names in assisted living plunged after

BancBoston Robertson Stephens

suspended ratings on four companies, citing uncertainty surrounding an expected government report on the industry.

Alternative Living Services

(ALI)

fell 4 1/16, or 15.7%, to 21 13/16;

Balanced Care

(BAL) - Get Report

fell 1/2, or 7.4%, to 6 1/4;

CareMatrix

(CMD) - Get Report

fell 5 3/8, or 22.4%, to 18 5/8; and

Sunrise Assisted Living

(SNRZ)

fell 3 1/8, or 7.6%, to 38 1/4.

Analog Devices

(ADI) - Get Report

slipped 1 1/2 to 32 3/8 even after Merrill Lynch raised it to near-term accumulate from neutral.

Asarco picked up 1 1/2, or 11.1%, to 15 1/16 after Morgan Stanley Dean Witter upped its rating on the copper producer to outperform from neutral. Morgan also raised recommendations on Cyprus Amax Minerals, which picked up 1 5/16, or 13.5%, to 11 1/16, and Phelps Dodge, which picked up 4 1/2, or 10.5%, to 47 1/2.

Icos

(ICOS)

jumped 1 3/4, or 6.5%, to 28 7/8 after

Prudential Securities

started coverage with a strong buy.

3Com

(COMS)

skidded 3 1/8, or 8.4%, to 34 3/16 after Prudential dropped it to hold from accumulate.

Yahoo!

(YHOO)

slid 21 3/8, or 6%, to 337 even after

Brown Brothers Harriman

upped it to short-term buy from neutral.

Miscellany

J. Ray McDermott

(JRM)

swelled 2 1/4, or 9.4%, to 26 1/4 after tendering to buy its $250 million of outstanding senior subordinated notes, due 2006.

Mony Group

(MNY)

gave up 1 to 27, matching an annual low, after

The Wall Street Journal

reported the

Securites and Exchange Commission

is investigating the accounting practices of the firm's

Mutual Life Insurance Co. of New York

unit.

Trimeris

(TRMS)

excelled 4 5/16, or 20.7%, to an all-time high of 25 3/16 after saying 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.