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Today's Market: Tech Takedown Continues

<LI>Ericsson drops after company issues ugly outlook.</LI> <LI>PMC-Sierra loses one third of its market value.</LI> <LI>Other chip stocks tumble.</LI>

(Updated from 9:33 a.m. EST)

With little direction from

Federal Reserve chairman

Alan Greenspan in his speech before the

Senate

Thursday, investors turned earnings-focused again. And they found themselves wading through a deep black sludge.

Echoing optical stock

Corning's

(GLW) - Get Corning Inc Report

warning Wednesday, another sector heavyweight -- this time

JDS Uniphase

(JDSU)

-- said Thursday that growth was hitting the skids.

The earnings muck from high-tech companies didn't stop there, with bad news from network and chip company

PMC-Sierra

(PMCS)

, Swedish mobile phone giant

Ericsson

(ERICY)

, manufacturer of enterprise software

BroadVision

(BVSN) - Get BroadVision, Inc. Report

and network and Internet security company

Network Associates

(NETA)

.

Some say the

Nasdaq Composite Index was due for a pullback after putting in an impressive performance so far this year. And that pullback began yesterday. The Nasdaq was 47 lower to 2708.

The

S&P 500, which tracks the broad market, was 8 lower to 1350.

"I don't think that we have a whole lot of impetus to bounce back today," said Todd Clark, head of listed trading at

W.R. Hambrecht

.

"We were ripe for pullback. It's not anything bad." He added: "The market is in better psychological and technical shape than in recent weeks, but we got to levels this week and didn't accelerate through them."

Meanwhile, the market will probably follow a recent pattern of favoring defensive stocks and selling tech. "It's going to be very group specific again. That's something that has defined the market in last couple of weeks," Clark said.

Thursday, the selloff in optical stocks took Corning down 19%, networking giant

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

8% lower and former investor favorite

Ciena

(CIEN) - Get Ciena Corporation Report

down 12%. The tech-clogged Nasdaq lost 3.5% of its fantastic year-to-date gains.

JDS hit its sales number on the head and beat second-quarter profit estimates. But it said high customer inventory levels and weak customer spending prospects will

dampen sales in the current quarter. Many phone and Net service providers, both large and small, have run low on cash and begun to pull back on network-equipment spending. This has led to an industrywide slowdown. Still, JDS was up 2% in early trading.

PMC-Sierra said last night that it earned 34 cents a share, in line with expectations. But the company

expects a sharp decline in revenue and earnings for the first quarter. That's been enough to scare the hair out of investors, who this morning are treating the stock like Nixon treated Agnew. It was recently down 32%.

Network Associates posted a wider-than-expected loss with 87 cents per share vs. the expected 79 cents. BroadVision missed fourth-quarter earnings estimates due to higher-than-expected costs. The company earned 2 cents per share, missing the analyst estimate by 3 cents a share.

Ericsson this morning reported a 46% drop in pretax income on a year-over-year basis and a 64% drop in earnings. It said it will quit producing its own mobile phones, instead outsourcing the business to Singapore's

Flextronics

. The company is also cutting jobs, which it said would save $1.55 billion a year.

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took a look at Ericsson's

ugly report. Ericsson was losing 15.5% this morning.

Dow component

Honeywell

(HON) - Get Honeywell International Inc. (HON) Report

, fresh off its yet-to-be-completed merger with

General Electric

(GE) - Get General Electric Company (GE) Report

, missed fourth-quarter earnings estimates by a penny, with 70 cents per share.

TheStreet.com

wrote a

separate story on the results. Honeywell was gaining 0.8%. The Dow, however, was off 32 to 10,699.

Wireless communications company

Qualcomm

(QCOM) - Get QUALCOMM Incorporated Report

was one of the lone gainers after it reported better-than-expected earnings after the close Thursday. But it fell short of consensus revenue estimates. Going forward, the wireless communications company said that it is comfortable with analysts' estimates for the current quarter and the year. It was up almost 4% in early trading.

The Rates

Meanwhile, the outlook for interest rates remains murky following Greenspan's speech before the Senate Thursday. Greenspan hinted that there is plenty of room for more interest rate cuts when he told members of the Senate he sees essentially zero economic growth right now. But he gave no indication as to whether, or by how much, the Federal Reserve's policy-making body would cut rates when it meets on Jan. 30 and Jan. 31. The Federal Reserve uses interest rates as a tool to control the economy. Higher interest rates help check inflation, while lower rates help spur economic growth.

The market is hoping for a half-point interest rate cut, but it's expecting a quarter point at the very least.

The Fed chairman also gave a nod to

President Bush's

tax cut plan yesterday, saying he now sees room for significant tax cuts over the coming decade, reversing a long-held view. Some market-watchers thought support of the tax cuts would give the market some fuel but others argue that his enthusiasm for tax cuts could have some worried that his view means a less aggressive move on interest rates.

Economic data released this morning before the opening bell probably won't do much to clarify this issue but it will be watched nevertheless.

December

durable goods orders released at 8:30 a.m. did not show the steep falloff during the month that economists had expected. The value of orders received by manufacturers for durable goods -- those products designed to last three years or more -- rose 2.2% in the month.. Economists had expected them to fall 1.7%, compared with a 2.3% rise in November. Durable goods orders tend to be a very volatile indicator.

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Bonds/Economy

Bond prices were soaring this morning. The benchmark 10-year

Treasury note was lately up 4/32 to 103 27/32, yielding 5.231%.

Thursday prices ended higher, with the long bond showing particular strength while shorter-term notes held steady. But the climb was not steady: The market moved up, then down and finally up again.

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International

European markets were showing mixed signs of weakness this morning.

London's

FTSE

was flat at 6255.60. Across the channel, Paris'

CAC-40

was off 46.22, or 0.78%, to 5888.46. Frankfurt's

Xetra Dax

was down 66.06, or 0.98%, to 6661.43.

The dollar was trading at $0.9231 euro this morning. The dollar hit a one-month high against the euro Thursday. The euro has been slowly gaining against the U.S. dollar amid expectations of a slowing domestic economy.

Asian markets broke a recent winning streak overnight after the U.S. market put in a lackluster performance Thursday.

Tokyo's key

Nikkei 225

slipped again for the third time this week, dropping 107.32, or 0.78%, to 13,696.06. The index was on an upswing until Tuesday after hitting a 27-month low Jan. 11.

Hong Kong's key

Hang Seng

remains closed for the Chinese New Year until Jan. 28.

The greenback was lately trading higher at 116.63 yen.

For more on world stock markets, check out

TheStreet.com's

global indices information.

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