Today's Market: Fears of a Tech Slowdown Spur Nasdaq Meltdown
It wasn't the election impasse but earnings concerns that had the
Nasdaq Composite Index ending the day at its 52-week closing low and the
Dow Jones Industrial Average suffering losses of more than 230 points.
The Nasdaq finished lower for the fourth straight day; it's down a hefty 12% for the week. The technology-laden index closed just above the 3000 level, at 3028.9. The last time it closed below that point was October 1999. The index is now nearly 40% off its March highs and about 25% off for the year.
The Dow, which also closed down for the fourth day in a row, is now off about 7.5% for the year.
The earnings concerns that had gripped the market's attention before the election crept back into investor awareness last night after PC-maker
Dell
(DELL) - Get Dell Technologies Inc. Class C Report
reported a
weak sales outlook. The news KO'd Dell and its competitors. Dell closed down $5.19, or 18.3%, to $23.00.
Gateway
(GTW)
hitting a 52-week low, down 14% to $39.74. Also,
Sun Microsystems
(SUNW) - Get Sunworks Inc. Report
slipped 8.6% lower,
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Micron
(MU) - Get Micron Technology Inc. Report
slumped 7.5%, and
Apple
(AAPL) - Get Apple Inc. Report
was off 5.6%.
Peter Cardillo, chief strategist at
Westfalia Investments
, said, "Election uncertainty is just an excuse. The real issue is how far is the economy slowing, which relates to future earnings."
In Cardillo's view, the election isn't an issue because, no matter the final outcome, "if anything, we will have more gridlock than we had before." With Congress so divided, no President would be able to get much done, he believes. He said that means if
George W. Bush
were to take office, he would not be able to implement massive tax cuts and if Vice President
Al Gore
were to sit in the Oval Office, he would be unable to push through massive spending on social programs.
Investors and traders will be carefully watching the
Federal Open Market Committee meeting next week. If the
Fed were to change its assessment to a neutral bias from its current inflation-tilted bias, that could spur a market turnaround.
Until then, says Cardillo, earnings will remain the predominant issue. To his way of thinking, Dell's warning increased a sense that the "once-powerful tech stocks that were the market leaders are no longer there."
In response to its warning, Dell was hit with negative actions by several firms this morning, including
Morgan Stanley Dean Witter
, which also smacked
Intel
(INTC) - Get Intel Corporation Report
with a downgrade.
Networking equipment maker
Cisco
(CSCO) - Get Cisco Systems Inc. Report
ended the day 6% lower. The company, which announced better-than-expected earnings earlier this week, along with news of a massive inventory, said it was buying the Internet messaging operations of
Active Voice
(ACVC)
for $266 million in stock. Active Voice was up 27.6%, or $4.13, to $19.06
Meanwhile, the Dow ended the day with the most drag from tech stocks, including
Microsoft
(MSFT) - Get Microsoft Corporation Report
,
IBM
(IBM) - Get International Business Machines Corporation Report
and
Hewlett-Packard
(HWP)
.
But tech stocks weren't the only story on the blue-chip index. Retailers
Home Depot
(HD) - Get Home Depot Inc. (The) Report
and
Wal-Mart
(WMT) - Get Walmart Inc. Report
were also down. Several retail components have reported a drop in third-quarter earnings amid overall sluggishness in sales.
Elsewhere, Elan
(ELN)
was the
Big Board's shining star. It was up 8.1%. The Irish pharmaceuticals group announced today that it had completed its acquisition of Dura Pharmaceuticals, based in California, saying it expected benefits of $50 million from the deal in its first year.
Market Internals
Breadth was terrible on moderate volume.
New York Stock Exchange: 889 advancers, 1918 decliners, 968.9 million shares. 50 new 52-week highs, 64 new lows.
Nasdaq Stock Market: 1011 advancers, 2846 decliners, 1.7 billion shares. 25 new highs, 223 new lows.
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Most Active Stocks
NYSE Most Actives
- Compaq (CPQ) : 22.8 million shares.
AT&T (T) - Get AT&T Inc. Report: 15.6 million shares.
Wal-Mart: 14.9 million shares.
Nasdaq Most Actives
- Dell: 120.2 million shares.
Intel: 92.7 million shares.
Cisco: 57.1 million shares.
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Sector Watch
Those stocks that are seen as favored by a Bush win in the White House closed in the green today, including the drug, tobacco and oil stocks. The
American Stock Exchange Pharmaceutical Index
closed up 0.4%, the
American Stock Exchange Tobacco Index
fired up 2%, and the
Chicago Board Options Exchange Oil Index
gained 0.1%.
The brokerage and bank stocks turned in miserable performances today, though insurance companies stayed relatively strong. The
American Stock Exchange Broker/Dealer Index
was down 3.6%, while the
Philadelphia Stock Exchange/KBW Bank Index
was down 1.8%. The
S&P Insurance Index
was up 0.3%.
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Bonds/Economy
Bonds opened marginally firmer today, though they ended mixed.
The benchmark 10-year
Treasury note was up 3/32 to 99 21/32, to yield 5.793%.
The 30-year
Treasury bond was at 105 10/32, down 2/32, to yield 5.868%.
No market-moving economic data were due today.
The preliminary
Consumer Sentiment Index
(
definition |
chart ) for November came out at 10 a.m., revealingthat consumer sentiment rose to 107.7 vs. expectations of 105.5.
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International
Unlike enemies of the U.S. around the world, Europe's markets were not enjoying the spectacle of the bastion of democracy facing a constitutional crisis.
At
Europe's close, London's
FTSE 100
was down 42 to 6400.2.
Over on the Continent, the
CAC-40
in Paris closed 123.66 lower to 6147.49 and the
Xetra Dax
in Frankfurt was off 107.81 to 6851.69.
The euro closed down on the day at $0.8594.
Asian
equity markets ended lower Friday, as the U.S. presidential election and the pressure it exerted on Wall Street continued to cast a shadow over the region's equities.
In Tokyo, the
Nikkei 225
closed down 71.5 points, or 0.5%, at 14,988.5.
In Tokyo currency trading, the dollar closed up, trading at 107.92 yen.
Elsewhere, Hong Kong's
Hang Seng
index also ended in the red, falling 115.4, or 0.7%, to 15,389.4. Taiwan's
TWSE
index closed near unchanged at 6088.7.
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