Don't look forward to today's market close. Look forward to Britney Spears and Madonna at the Grammy's tomorrow evening. Look forward to the Oscars in March. Look back at the Golden Globes. Just don't look at the tape today -- the technology selloff is uglier than any hour-long acceptance speech ever could be.
Nasdaq Composite Index continued to slide in the wake of
warning last week that its business was in trouble.
Dow Jones Industrial Average was fighting to stay on the plus side, despite goodwill toward retailers
. Both retailers released earnings this morning.
Wal-Mart posted fourth-quarter
earnings that beat estimates, despite a lackluster holiday season. Going forward, it said that first-quarter earnings would come out in-line with expectations. Home Depot's release was bleaker, coming in with fourth-quarter earnings
that met lowered expectations and were less profitable than last year. That said, the Depot said it was comfortable with first-quarter estimates.
Wal-Mart gained 3% and Home Depot gained 3.7%, giving another big boost to the revival in retail since the beginning of the year. Today, the
S&P Retail Index
rose 2.7%. A bunch of retail names have snuck up on 52-week highs over the past seven weeks.
were all at or near new highs today.
Outside of the retail rally, there weren't clear market leading stories. Early in the morning, the Dow got support from many defensive names, like
Johnson & Johnson
, but a rush out of technology has easily offset those gains.
pulled the Dow into the red. The trio dragged on the Dow and were a pretty good indicator of what was going on market-wide today. Tech was getting killed, while non-tech names were spared.
and other suppliers of fiber-optic components had their economic fortunes reduced yet again this morning, throwing yet another shrimp on the tech-based barbecue. The latest reduction comes courtesy of
, which lowered earnings estimates on JDS Uniphase,
Applied Micro Circuits
. Lehman said it made the revisions because of inventory problems and the companies' limited ability to forecast near-term business growth.
Credit Suisse First Boston
Charlie Glavin jumped into the fray, downgrading PMC-Sierra to hold from buy, citing "industry conditions that have actually gotten worse over the last few weeks." Glavin also cut Applied Micro Circuits to buy from strong buy due to soft business in the March and June quarters. Last week, CSFB and
reduced JDS Uniphase's earnings estimates.
visibility is extremely poor as order cancellations and push-outs make it extremely difficult to predict the final outcome of the March quarter, let alone the June quarter," Lehman analyst A. Chanda wrote to investors. "We are therefore reducing our estimates."
Applied Micro Circuits was the only one of the four not to hit a 52-week-low. Forget the gauze. Just break out the chalk and start outlining.
The rest of tech was as bad, if not worse than the fiber-equppers. Biotechs, boxmakers, chipmakers, dot coms and networkers were all lower. Everything is glued together, with weakness in one sector pulling others with it. The
Morgan Stanley High-Technology 35 Index
, which tracks the 35 tech companies that are most widely held by people, was off 3.2%.
Check this out:
- Sun Microsystems (SUNW) - Get Report fell 1.9% and hit a 52-week low.
Cisco Systems (CSCO) - Get Report fell 4.7% and hit a 52-week-low.
Nortel (NT) fell 4.6% and hit a 52-week-low.
Corning (GLW) - Get Report fell 6.1% and hit a 52-week-low.
Amazon.com (AMZN) - Get Report fell 4.6% and hit a 52-week-low.
Nextel Communications (NXTL) fell 10.3% and hit a 52-week-low.
Do you see a pattern yet?
They're not the only ones. A grand total of 76 companies on the Nasdaq have hit 52-week-lows.
You can blame visibility issues -- that is, trouble companies are having figuring out what future business will look like -- for the big drop in stock prices.
After a rip-roaring January, technology components suppliers have fallen lower and lower this month as companies continue to complain that the next few quarters will be weak. Or they admit they're not sure of the outlook for the first half of 2001. JDS Uniphase gained 31.5% in January only to stumble 34.7% in February as its competitors warned about slowdowns.
Joe Kalinowski, equity strategist with earnings tracker
First Call/Thomson Financial
, said that 289 companies have already pre-announced bad news about their earnings in the first quarter. Almost a third of those are technology-related businesses. In comparison, only 33 companies had said anything about the first quarter at this point last year.
As these pre-announcements flood the market, look for more analyst adjustments, market movements and sleepless nights -- because sometimes, the only problem with improving visibility is not enjoying the view.
Market Internals and Most Active Stocks
The Nasdaq should probably hide the sharp objects and rope. It was awash in losers, big losers. Note the number of new lows.
Nortel hit a 52-week low and topped the
Big Board's list of most actives. Corning, at the No. 3 slot, also hit a 52-week-low. Meanwhile, uptown at the Nasdaq, Cisco and JDS Uniphase topped trading and also hit 52-week-lows.
Anyone up for a chorus of "Swing Low, Sweet Chariot?"
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Financials got destroyed today. The
American Stock Exchange Securities Broker/Dealer Index
fell 4.2%, while the
S&P Insurance Index
fell 1.9% and the
Philadelphia Stock Exchange/KBW Bank Index
fell 5.6%. And
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Treasury prices are down in very thin trading as the money market has little to respond to except equity movements. According to
, which does market flow analysis, current trading volume is about 50% lower than the average of last week.
Notes and bonds, after having sold higher in the previous session due to very weak -- and potentially inflationary -- reports on producer prices and consumer sentiment, seem to be sliding again in response to rising stocks. Analysts expect this trend to continue for most of this week.
The benchmark 10-year
Treasury note lately was down 5/32 to 98 31/32, raising its yield to 5.131%.
Standard & Poor's
speculative grade credit index, which measures the difference between the yields of government Treasuries and those of bonds rated below BBB+, was at 894.5 basis points, or 8.945%, on Friday. The difference has steadily decreased from a high of 10.74% on Jan. 2, just before the
Federal Reserve began cutting rates. Expectation that the economy will recover with help from the Fed has sent U.S. Treasury prices lower on weakening demand, preventing yields from falling further. Prices and yields move inversely. This has contributed to the narrowing of the index.
A recent survey by the
Federal Reserve Bank of Philadelphia
estimates that the U.S.
gross domestic product
) should grow by about 2.2% in 2001, down from the 3.3% annual growth that was forecast two months ago. However, that's not likely to jolt the market, as most economists and regional Fed presidents lately have been pegging the growth rate at 2% to 2.5%.
There is no economic news due out today.
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Over in Europe, markets took a swandive into their trading day swansong. London tried clinging to midday gains like a cat on a lampshade, before dropping into the deep abyss of a tech sell off. The
fell 110.8 to 5983.2 -- that's a drop of 130 points in just under four hours. Germany's
, which trades until mid-afternoon here in the States, was off 19.8 to 6452.4, while Paris'
lost 53.1 to 5531.6.
On the currency front, the euro continued to slump, moving further and further away from the 94-cent level it traded at just weeks ago. It last traded at $0.9097, lower than the 91 cents or so it traded around during Friday's session. The yen traded at 115.54, relatively unchanged.
Tokyo's markets were up, something of a rarity lately. The beleaguered
knocked home a gain of 128.8 to 13,248.4 after traders shrugged off a not-so-good earnings forecast from
. Chipmakers, which have been destroyed in recent weeks, managed to actually make some gains, something that many said was a sign of a tech bottom. Then again, American markets took a day off yesterday and hopeful traders operated without the specter of another American sell off on the horizon. Hong Kong's
gained 36.4 to 15,527.4.
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