Last night's profit warnings from PC-maker
and specialty chipmaker
, which went over with Wall Street like a lead balloon, have left the major indices with triple-digit losses in midday trading.
At last look, stabilization was not in sight. The
Dow Jones Industrial Average was down 208 points to 10,420 and near its session lows. The
Nasdaq Composite Index, which tried to cushion its blows mid-morning, was off 154 points to 2553, close to its lowest levels of the day and below the 2600 support mark.
"The problem with the market is that there is no buying support," said Brian Belski, fundamental market strategist at
U.S. Bancorp Piper Jaffray
. "Until we have a solid day without bad news, we're not going to see a turnaround. A short-term oversold bounce will be the only thing to bring us out of the doldrums."
Without buyers, stock prices will continue to drop like flies. Investors today have picked over the Nasdaq's carcass, sending over 500 of its components to new 52-week lows. At the heart of the storm, shares of Gateway had lately plunged 39% to $18, while Altera had recently sunk 11.8% to $22.88. Many of the biggest names in technology --
-- had lost close to 10% at the midday mark.
, off 6% to $93.88,
, behind 8.5% to $31.63, in addition to Microsoft led the selloff on the Dow side.
Adding to the carnage in the wake of last night's pre-announcements has been an onslaught of analyst downgrades on technology stocks this morning.
Salomon Smith Barney
all lowered their recommendations on Gateway. Salomon Smith Barney also cut its rating on Dell. In recent trading, the
Philadelphia Stock Exchange Computer Box Maker Index
, which tracks the performance of PC stocks, had lost 10.6%.
"The microscope is now on the lack, or perceived lack, of corporate growth," Belski stressed.
Indeed, Wall Street has focused its attention on Gateway's profit warning, which by all accounts was severe. After the closing bell, the boxmaker warned that it anticipates fourth quarter sales and profits to come in sharply below Wall Street's forecasts.
"The economic slowdown, coupled with ongoing shifts in PC seasonality, clearly had a significant impact on our sales over the holiday weekend. We expect these issues will continue to have an effect on overall demand in the next 12 to 18 months," Gateway said in a statement. The company also lowered its full-year earnings guidance for 2001. (
analyzed Gateway's news in a separate
Worth noting is that Gateway was the only major boxmaker to survive the third-quarter -- which scalded the PC sector -- largely unscathed. But the PC manufacturer has been badly burned in the fourth quarter.
Enough Bad News for Everyone
Moving on to the other major casualty of the day, Altera was lately sharply lower after bottoming at a 52-week low of $19.63. After yesterday's close, the chipmaker lowered its guidance for fourth-quarter revenue, citing sluggish November sales. The warning brought on a slew of downgrades from the likes of
Credit Suisse First Boston
The semiconductor sector has seen staggering losses today. Among the chips falling,
dropped 13.3% to $89.75,
fell 11.5% to $30.38 and
, which saw its earnings-per-share estimates downgraded by
along with Altera on Monday, decreased 9.7% to $38.75. The
Philadelphia Stock Exchange Semiconductor Index
had recently staggered 9%.
On a day where good news was hard to find, Goldman Sachs' chief equity strategist and staunch bull Abby Joseph Cohen this morning reiterated her 12-month target for the
S&P 500 of 1650, which would be a 25% gain in the next year. Cohen, however, is no longer mentioning that in October she predicted that the S&P's would be at 1575 value by the end of 2000.
No doubt, the semiconductor and PC sectors have stolen the show today. But the effect that their bad news has had on many groups is enormous.
In afternoon trading,
TheStreet.com Internet Sector
had stumbled 8.1%. Shares of Internet bellwether
had plummeted 8% to $35.94. In the midst of the holiday season, which is absolutely critical for Internet retailers,
lost 13.8% to $32.06 and
fell 11.4% to $23.75 in recent trading.
In fact, there was not much holiday cheer for retail stocks today as disappointment with today's same-store sales reports drove investors to sell. Most U.S. retailers reported only modest gains in November same-store sales, showing that consumers continue to be cautious about their spending as signs that the economy is slowing grow.
S&P Retail Index
was off 2.4%. A few retailers did report strong same-store-sales, including
however, and were benefitting from it. Kohl's was up 0.2%.
Drug stocks continued their heady rally begun in early September, when the Nasdaq began to falter. The
American Stock Exchange Pharmaceutical Index
was up 0.6%.
, which hit an all-time high yesterday, was off 0.3% to $94.50.
Oil stocks continued to lose ground today. The
Philadelphia Stock Exchange Oil Service Index
fell off 5.5%.
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Treasuries are rallying in response to the latest leg down in stock prices, dropping yields to new lows for the year. Falling stock prices continue to suggest to bond investors that growth will slow more in the months ahead, possibly prompting the
Fed to lower interest rates.
The benchmark 10-year
Treasury note lately was up 15/32 to 102 2/32, its yied falling to 5.474%.
People are surer than ever that the Fed will lower the
fed funds rate in the next few months. For the first time,
fed funds futures contracts are discounting more than 100% odds that the fed funds rate will be 6.25% by April, down from 6.5% currently.
Earlier, Treasuries, which have been rallying for months on the expectation that economic growth would slow, largely ignored evidence that the slowdown is at hand.
"This is what we've been discounting since May when we began to rally," said Tony Crescenzi, bond market strategist at
and CEO of
, said. "We get the action we've been looking for, and it starts to go the other way."
The latest evidence that the economy is slowing includes a surprisingly weak showing by the
Chicago Purchasing Managers' Index
chart ), and a rise in
initial jobless claims
The Chicago PMI, which gauges the health of Midwest-based manufacturing companies, plunged to 41.7 in November, its lowest reading since April 1991, from 48.7 in October. Economists polled by
had forecast a slight rise to 48.9, on average. Readings below 50 indicate that the Midwest manufacturing sector is contracting rather than growing.
Initial jobless claims rose to 358,000, the highest since July 1998, from 339,000 the previous week. The four-week average rose to 343,000, also the highest since July 1998, from 331,000. The rise in claims for unemployment insurance indicates that demand for workers is easing as the economy slows.
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European markets were shaken from the get-go by Gateway's warning last night, and the dire consequences it would have for U.S. tech stocks. London's
closed down 22.7 to 6142.2.
Across the channel, Paris'
finished down 132.57 to 5928.08, while Germany's
, still trading, was off 180.95 to 6417.37.
The euro was rebounding at $0.8691.
Asian markets were mixed overnight. Japan's
rose 140.87 to 14,648.51, while the Hong Kong's
lost 184.67 to 13,984.39.
The greenback was getting 110.83 yen.
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