Markets were learning the facts of life one day after a mammoth rally sent the
Nasdaq Composite Index up more than 10% for a record-shattering performance.
After yesterday's close,
warned about future earnings.
And what a warning it was. Instead of coming in with expected revenues of $1.6 billion in the first quarter, the company said it would only pony up $1 billion in revenue, a 40% shortfall. You can bet that got the analysts going. A plethora slashed estimates for Apple and cast a deathly pall over the already ailing computer-making industry.
It was just five days ago that both
and specialty chip maker
warned that their future earnings would miss estimates. Can it get any more crystal clear that the tech sector won't be experiencing the torrid growth of recent quarters.
Credit Suisse First Boston
analyst Kevin McCarthy had something to say about it, cutting the rating and revenue estimates not only on Apple, but also on Gateway and
saw their future forecasts reduced as well.
Said McCarthy: "We can no longer ignore signs of shriveling demand."
And the boxmakers, as the folks who make computers are known,
suffered the fury of investors scorned. The
Philadelphia Stock Exchange Computer Box Maker Sector
, which tracks the industry, fell 6.8%.
Dow Jones Industrial Average was getting buried, blindsided by the stumble in old-technology names Hewlett-Packard and IBM -- the same guys who helped add support to yesterday's rally.
They weren't the only stinkers. Chipmaker
and software company
were weak. Intel was off 8.7% and there were conflicting reports about whether there was a damaging report that came out earlier today from an analyst.
Weakness in stocks was being exacerbated by a flight out of defensive plays like pharmaceutical
Johnson & Johnson
and aircraft manufacturer
, whose stock price has been soaring all year.
was getting hit, slipping 2.7%, as the price of oil stumbled below $30. It wasn't long ago, remember, that the markets were roiled because a barrel of crude had climbed above $35. Lower crude prices hurt oil companies' profit margins.
Meanwhile, the exodus of
upper management to other blue-chip companies continued. One day after
snagged James McNerney to be its new chief executive, the home improvement chain
announced that Robert Nardelli, former president of GE's power systems unit, would become its
new CEO and president.
Morgan Stanley High-Technology 35 Index
, which tracks some of the biggest names in the business, was off 2.4%. Investors managed to offset those losers by rushing into wireless and telecommunications names, which were pushed higher by
. Nokia yesterday put out a
bullish outlook on its growth prospects.
Financials, an often-overlooked component of the tech-heavy Nasdaq, gained momentum today after the dovish comments yesterday from
Federal Reserve Chairman
Alan Greenspan led to speculation the policy-making Fed will adopt a neutral position about the risks of inflation at its Dec. 19 meeting. Investors are beginning to believe the Fed will soon begin to cut interest rates. That helps financials because lower rates spur consumers and corporations to borrow more. The
Nasdaq Financial 100
Boy, where'd all that volume come from? For the past few weeks, market internals have been all about losers beating winners on thin trading. But after a couple of sessions with heavy volume, the buyers have returned, especially in the wake of yesterday's rally.
New York Stock Exchange: 1,338 advancers, 1,421 decliners, 738 million shares. 124 new 52-week highs, 60 new lows.
Nasdaq Stock Market: 1,757 advancers, 1,902 decliners, 1.3 billion shares. 67 new highs, 141 new lows.
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Most Active Stocks
NYSE Most Actives
- Lucent (LU) : 17.3 million shares.
Nokia: 14.9 million shares.
Compaq: 13.5 million shares.
Nasdaq Most Actives
- Intel: 53.2 million shares.
Cisco (CSCO) - Get Report: 42 million shares.
WorldCom (WCOM) : 33.6 million shares.
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Cyclicals were easing, after rallying 8.7% over the past three days. The
Morgan Stanley Cyclical Index
, a collection of stocks like drug makers, heavy materials and automakers, was off 1.7%. And fittingly, the
American Stock Exchange Pharmaceutical Index
was off 3.1%.
Philadelphia Stock Exchange/KBW Bank Index
rose 2.3%, extending the pro-Bush financial rally for a second day that's been fueled by the Fed's comments that show it knows an economic slowdown has begun.
And as the price of crude oil futures continue to slide, now dipping below $30 a barrel on the
New York Mercantile Exchange
, so do the fortunes of the
American Stock Exchange Oil & Gas Index
, which fell 2.5%.
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Treasuries are getting a lift from the downturn in stock prices. The rally is pushing yields down to new lows for the year.
The benchmark 10-year
Treasury note lately up 16/32 at 102 29/32, dropping its yield to 5.36%, another new low for the year.
Falling stock prices increase the appeal of bonds as an alternative investment and indicate waning confidence in the economy, calling for lower interest rates and higher bond prices.
Treasuries yesterday staged a huge rally in response to remarks by Alan Greenspan in which he acknowledged that the economy is at risk of slowing too much. Presumably, the Fed will lower interest rates in the next several months to keep that from happening.
Today's economic data, while not market-moving, is marginally negative for Treasuries. Mortgage activity increased, according to the
Mortgage Applications Survey
), forecasting increased consumer activity generally. And third-quarter
productivity and unit labor costs
) were revised lower and higher, respectively.
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European markets were crumbling at the end of their trading day following early morning strength.
was off 21.9 to 6277.1, despite the fact that technology stocks were rallying. Unfortunately for the index, oil- and drug-related companies fared poorly as the price of oil continued to slide and people moved out of defensive areas following yesterday's big rally in the U.S.
rose 23.9 to 6660.9, as banks and technology moved higher. Paris' CAC fell 9.7 to 5985.2.
People have been keeping a close eye on the euro lately. And with good reason. After slumping for much of the fall, the currency last traded at $0.8875, an improvement from yesterday. The euro has been moving up over the past few weeks. The yen traded at 110.36.
Asian markets, which have a lot of technology-related companies, have been tracking the
Nasdaq Composite's movements lately. And following yesterday's incredible 10% rally, both Japanese and Hong Kong markets were much, much nicer. Japan's
rose 194.32 to 14,889.37, while Hong Kong's
gained 575.74 to 15,098.95.
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