Today's Market: Stock Slaughter Continues; Dow, Nasdaq Both Bathed in Red

Microsoft's first warning in 10 years has sent both tech and nontech issues reeling today.
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Dear Mr. Bill Gates, ever since your company,

Microsoft

(MSFT) - Get Report

, warned about its

second quarter last night, the tape has been packed with more blood than

an Estonian sausage festival.

Both the

Dow Jones Industrial Average and the

Nasdaq Composite Index have suffered severely as the result of your miss, as investors have stayed out of technology and walked away from the buying table.

Thanks a lot, Bill. XOXO -- Wall Street.

There wasn't a lot of love out there after the software giant and blue-chip member announced that its earnings would also be impacted by the slowing economy. It added 39 points to the Dow's downside, while

IBM

(IBM) - Get Report

,

Intel

(INTC) - Get Report

and

Hewlett-Packard

(HWP)

took their cues from Bill "kicking open Hell's" Gates.

Not that there's much safety in nontechnology, either.

J.P. Morgan

(JPM) - Get Report

continued to reel one day after it and merger partner

Chase Manhattan Bank

(CMB)

announced that earnings would miss expectations and that Chase's venture capital arm has losses of $300 million on the books, fueling speculation that the House of Morgan was not alone in feeling the financial crunch. Fellow financials

Citigroup

(C) - Get Report

and

American Express

(AXP) - Get Report

were also lower, while the

American Stock Exchange Securities Broker/Dealer Index

, of which Morgan is a member, slid 3.7%.

All in all, today has been a total washout on the Dow, with only 7 of the 30 industrials posting gains.

Not that the Comp was much better, as a shockingly high number of its four-lettered issues were in the red. A total of 2829 were posting losses at midday vs. a mere 914 with gains. Volume was very heavy, however -- a sign that this selling is certainly for real. More than 250 issues reached 52-week lows.

Thanks a lot, Bill. Like an eight-year-old hopped up on

Mountain Dew

in a

Radio Shack

, Microsoft made a mess of technology today, throwing chaos into a sector that's seen its share of tantrums. Sure, Mister Softie's warning came after warnings from nearly every major name in tech, like

Gateway

(GTW)

,

Dell

(DELL) - Get Report

,

Compaq

(CPQ)

,

Intel

(INTC) - Get Report

and

Apple

(AAPL) - Get Report

-- but it still hurts a lot.

It is now clear that the industry has slowed down, with warnings from every corner of the market, from disk drive peripheral manufacturers to personal computer retailers to semiconductors. And with slowdowns in one area, there's very little way to contain the damage, especially given the incestuous nature of tech, where chipmakers live off PC makers and entire industries are built around providing services and supplies on an informal quid-pro-quo basis. Most of these businesses are linked quite closely and when one takes a hit, all should suffer, at least in part.

This ripple effect has been catastrophic lately, with nary a day passing without another major name preannouncing about future earnings. Microsoft is one of the kings of tech. And today, that king was dead, falling 11.7%, and taking its subjects with it.

Looking around, perhaps the bloodiest sector today was simply large-cap technology, those blue-chip technology names that are the most widely-held -- companies just like Microsoft. The

Morgan Stanley High-Technology 35 Index

, which tracks these big fishies, was off 4.5%. And a big part of that index's stumble has been

Sun Microsystems

(SUNW) - Get Report

, which has fallen 35% in just two weeks and after today's freefall of 9.7%, was at a 52-week low.

But not all of the large-cap tech news was negative.

Oracle

(ORCL) - Get Report

, the No. 2 software maker behind Microsoft, gloated about sales while easily beating estimates, rubbing its rival's nose in the dirt. Oracle last traded up 7.1%. For more on the battle between Larry Ellison and Bill Gates, check out

this story published earlier today by

TheStreet.com

.

Dot-coms were bleeding like a stuck pig, trading not far from 52-week lows, as all that happy sentiment about

America Online's

(AOL)

merger go-ahead from the

Federal Trade Commission

has been magically transformed into terror about future earnings. AOL dropped 6%, as a lot of the smaller companies in the index hemorrhaged value.

MarchFIRST

(MRCH)

continued its quest for a sub-$1 stock price, losing 9.8% to $1.75, while

CMGI

(CMGI)

fell to record lows after announcing earnings that beat Wall Street expectations last night.

Unfortunately for CMGI, many investors are really fascinated by

profits

, not losses. Hey, losing $600 million in a quarter and getting good press for it is like,

so

1999! And last night, the company's earnings picture didn't show a shred of profitability. The company posted fourth-quarter losses of $2.07 a share, six cents better than expectations on a net loss of $636 million, $3 million worse than the year before.

Competitor

Internet Capital Group

(ICGE)

, another Internet incubation play, fell in sympathy, dropping 8% and hitting 52-week lows, while the

TheStreet.com Internet Sector Index

fell 4.3%.

Investor, why hast thou forsaken tech? Personal computers were much lower, as were biotechnology, wireless, telecommunications, e-commerce, e-finance and networkers.

Welcome to hell.

Oh, and heads up. Today could get ever stranger, since it's

triple-witching day -- the quarterly expiration of index futures, index options and options on stocks. This can lead to some volatility as people try to cover and make moves to compensate the expiration. Already, volume is higher than usual, so it seems that the effects are already being felt.

Market Internals

There was nothing funny about the number of losers out there. In unrelated news,

Dude, Where's My Car?

hits theaters today. See any connection?

New York Stock Exchange: 1,076 advancers, 1,712 decliners, 1.006 billion shares. 74 new 52-week highs, 84 new lows.

Nasdaq Stock Market: 917 advancers, 2,830 decliners, 1.522 billion shares. 24 new highs, 266 new lows.

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Most Active Stocks

NYSE Most Actives

  • General Electric (GE) - Get Report: 25.4 million shares.
  • EMC (EMC) : 24.7 million shares.
  • Citigroup (C) - Get Report: 17.8 million shares.

Nasdaq Most Actives

  • Microsoft: 103.3 million shares.
  • Oracle: 76.1 million shares.
  • Cisco (CSCO) - Get Report: 68.3 million shares.

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Sector Watch

Markets have been keeping a rather close eye on those wily natural gassers lately. The

American Stock Exchange Natural Gas Index

, a basket of the industry's biggest names, has been ripping out the big gains and kicking out the jams as the price of natural gas futures has skyrocketed. The index was up 1.9% after heavy profit-taking yesterday.

Today, natural gas futures on the

New York Mercantile Exchange

were up to their old tricks, making big percentage moves to the upside. Gas was last up 13.4%.

Other petroleum-related sectors also tracked higher with the price of futures. The

American Stock Exchange Oil & Gas Index

rose 0.9%, while crude futures on the Nymex rose 49 cents a barrel to $28.48, inching the price of January crude futures closer to the $30 level. The

Philadelphia Stock Exchange Oil Service Index

rose 1.1%.

Chemical stocks in the

S&P Chemical Index

fell 1.8% as the industry has been shaken by bad news in recent days. Index members

Praxair

(PX)

and

PPG Industries

(PPG) - Get Report

both announced restructuring plans yesterday, while

W.R. Grace

(GRA) - Get Report

saw its credit rating downgraded to junk status by

Standard & Poor's

credit rating agency on Tuesday.

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Bonds/Economy

Treasury note and bond prices have recovered from a hotter-than-expected inflation report thanks to the weakness in stocks, which suggests investors believe the economy will continue to weaken. The gains are dropping most Treasury yields to new lows for the year.

The benchmark 10-year

Treasury note, down as much as 6/32 earlier, lately was up 4/32 at 104 6/32, with a yield of 5.190%.

The

Consumer Price Index

(

definition |

chart |

source

), showed that prices of key goods and services rose more than expected in November.

The core CPI, which measures the prices of goods and services excluding food and energy, whose prices are volatile, rose 0.3% in November. Economists polled by

Reuters

had forecast a 0.2% rise, on average. The annual growth rate of the core CPI rose to 2.6% from 2.5%, matching its highest level of the year.

Consumer prices of all goods and services, including food and energy, rose 0.2% in November, in line with economist expectations. The annual rate of increase held steady at 3.4%.

In other economic news,

industrial production

(

definition |

chart |

source

) unexpectedly fell in November, providing additional evidence of economic weakness, which stokes demand for bonds. Industrial production fell 0.2%. Economists had forecast it would be unchanged on average.

As production fell, the capacity utilization rate, which measures anti-inflationary slack in the industrial sector of the economy, found more of it. The rate fell to 81.6%, the lowest since November 1999.

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International

European markets followed American markets lower as pressure built on technology and banking. The picture wasn't good toward the end of the European trading day. London's

FTSE

was off 67.2 to 6196.6. While on the Continent, things were much worse. The Paris

CAC

dropped 71.2 to 5834.4, while Germany's

Xetra Dax

dropped 85.3 to 6384.6.

The euro, which has been a rockin' and a rollin' lately, was lately at $0.8971. That's a three-month high, with the euro looking to crack the 90-cent barrier, a level it's found difficulty attaining.

Asian markets were trading when the Microsoft warnings ran across the tape and faced a tsunami of selling. Japan's

Nikkei 225

dropped 374. 90 to 14,552.29, while the Hong Kong

Hang Seng

slid 521.46 to 14,975.53.

The yen traded at 112.45.

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