The Night Watch: Intel's Warning Wreaking Havoc in After-Hours Action - TheStreet

Updated from 6:31 p.m. ET

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    The flu struck the tech stocks today and it wasn't caused by chickens. Tonight's star-studded ECN's looked like the who's who of the Nasdaq all lined up in body bags. With all the biggies bleeding tonight, it doesn't look too good for tomorrow's session.

    The daylong losing battle of the

    Nasdaq's tech darlings was not helped by

    Intel's

    (INTC) - Get Report

    postbell announcement that it would miss its third-quarter revenue numbers, due to weaker demand in Europe. The company expects third-quarter revenue to rise 3% to 5% from the second quarter's $8.3 billion.

    The Santa Clara, Calif., chipmaker said third-quarter gross margin would also fall below estimates, at 62% vs. the previous 63%-64% guidance.

    Intel shares were falling $12.35, or 20%, to $49.12 and drew 1,662,314 shares of interest to a lately lethargic Island ECN. Intel fell $12.98 to $48.50 on almost 7 million Instinet shares.

    NITE stole the day, with a dramatic spike in the last half hour of trading. But at night,

    Knight Trading Group

    (NITE)

    relinquished its sudden gains after ending 6% higher. Before the spike, the New Jersey-based market-maker traded in the red from the opening bell.

    The pressure came after the stock's rumor bubble, which had been supporting prices, burst. There was speculation that

    Morgan Stanley Dean Witter

    will buy the company to jump-start its own nascent market making business for Nasdaq stocks. Talk of a pending deal ramped up Knight's stock price last week as it seemed likely that Morgan Stanley would make a bid for the firm after competitors

    Merrill Lynch

    (MER)

    and

    Goldman Sachs

    (GS) - Get Report

    snapped up other leading market makers. Knight shares grew darker as the session wore on, giving back $3.62, or 9%, to $35.12.

    Dell

    (DELL) - Get Report

    finished the day's battle with a few scratches (down less than 2%), but it was really getting roughed up after hours.

    With investors in such foul moods, even good news is soon forgotten. Dell edged up 1% at the start of trading after Merrill Lynch reiterated it as a buy and said it is confident the company will meet its third-quarter sales and earnings goals. But, later news broke that Dell was pulling out of its agreement to sell

    Network Appliance

    (NTAP) - Get Report

    storage servers under the Dell brand name. The companies found that they were competing for the same customers and decided to change their strategy. Not that this news justifies a $4.05, or 10% plunge, to $33.88, but investors were looking for any excuse to give tech stocks a bath.

    It's definitely allergy season but that's not why semiconductors were feeling sick today. The

    Philadelphia Semiconductor Index

    , a key indicator of chip and chip-equipment stocks, lost 4.5% and that was before Intel's announcement.

    Tonight, after Intel, chip-maker

    Applied Materials

    (AMAT) - Get Report

    gave ground today and lost another $6.06 to $67.93 in night-time's sniffly, sneezy sympathy.

    This information is provided by Instinet, a wholly owned subsidiary of Reuters (RTRSY) . For further information, please contact Instinet at www.instinet.com.

    Island ECN, owned by Datek Online, offers trading, mainly in Nasdaq-listed stocks, from 7 a.m. to 8 p.m. EDT.

    Confused?

    TheStreet.com

    explains how the rules change when the sun goes down in Investing Basics: Night Owl, a section devoted to after-hours trading.