Today's Market: WorldCom's Woes Spread to Broader Market; Dow, Nasdaq End in the Red
After two days of ripping it up, the major indices succumbed to selling pressure today, led by revenue warnings from telecommunications provider
WorldCom
(WCOM)
and semiconductor manufacturer
Altera
(ALTR) - Get Altair Engineering Inc. Report
, both of which ended the day with 20% losses.
WorldCom
warned fourth-quarter earnings would fall between 34 and 37 cents a share, much lower than the
First Call/Thomson Financial
49-cent consensus. It also announced, similar to
AT&T
, its intention to split into distinct units to refocus its business. The stock lost $4.81 to $18.94, a 20% loss, on 192 million shares traded, approximately 10% of all volume on the
Nasdaq Stock Market, and the third-highest one-day volume for a stock in the history of the Nasdaq.
Meanwhile, chip maker Altera dropped after issuing its own fourth-quarter earnings
TheStreet Recommends
warning. The stock fell $8.38 to $32.56, or 20.5%.
But the woes in these two individual names didn't put a damper on market sentiment. The Nasdaq finished down just 36 points today with nearly two billion shares traded, and though the
Dow Jones Industrial Average finished off 71.67 points, the index still sits at 10,899.47, a level not seen since mid-September. Investors' belief that the economy and earnings growth will retain strength despite a mild slowdown is growing, and therefore, the overall market has displayed strength since dropping sharply the morning of Oct. 18.
"Anybody who may have misled themselves that days like yesterday would be a straight-line event maybe don't belong in the market to begin with," said David Sowerby, portfolio manager at
Loomis Sayles
. "In these cases, there's a phrase that's used -- the pause that refreshes -- but you still have two weeks of what's been a very good market."
Today was only the second decline on the Dow in the last 10 trading days. In the last two weeks, investors resumed their purchase of blue-chip and cyclical stocks on the thinking that those names were undervalued. Technology stocks followed suit yesterday after coming under fire for weeks. And while the tech-heavy Nasdaq isn't anywhere near the frothy levels of early 2000, there's an underlying feeling that the market has, for now, seen the worst of it.
Not that it means certain sectors, from time to time, aren't going to get pummeled. Telecommunications stocks were absolutely crushed, thanks to WorldCom.
Sprint
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dropped 9.8% today, AT&T lost 5%, and
British Telecom
(BTY)
dropped 3.8%. The
Nasdaq Telecommunications Index
fell 2.7%.
Semiconductors, not surprisingly, were also in tatters today. The
Philadelphia Stock Exchange Semiconductor Index
lost 3.8%, led by the losses in Altera and fellow equipment maker
Xilinx
(XLNX) - Get Xilinx Inc. Report
, which dropped 6.9%, and
Applied Materials
(AMAT) - Get Applied Materials Inc. Report
, which lost 3.5%.
Other big-cap technology stocks were mixed.
Cisco
(CSCO) - Get Cisco Systems Inc. Report
gave back a good lot of yesterday's gains, losing $1.75 to $52.13;
Oracle
(ORCL) - Get Oracle Corporation Report
dropped $1.63 to $31.38.
The same can be said for the New York Stock Exchange's behemoths. Financial stocks dropped after
Salomon Smith Barney
cuts its earnings estimates on several brokerages. One of them,
Lehman Brothers
(LEH)
, lost 5.6% today.
Consumer products stocks waned again today after
Procter & Gamble's
(PG) - Get Procter & Gamble Company (The) Report
earnings report yesterday. That stock dropped 3.4% today;
Colgate Palmolive
(CL) - Get Colgate-Palmolive Company Report
lost 3.2%.
The market's recent activity, with the Dow reaching levels not seen in a month and the
S&P 500 improving to early October levels, has investors wondering what will come next. The election will be over soon, and it won't function as a shackle (or an excuse) for the market anymore. Right now, there seems to be little to motivate the market other than self-serving blather about the historically strong performance of stocks in the November-January period.
"It was such a big day yesterday, that it's not surprising we're giving some back today," said Robert Lee, senior vice president of
Sentinel Advisors
in Montpelier, Vt. "I do think things will start to settle in the next two months."
Market Internals
Breadth was negative on strong volume.
New York Stock Exchange: 1,411 advancers, 1,466 decliners, 1.2 billion shares. 62 new 52-week highs, 41 new lows.
Nasdaq Stock Market: 1,829 advancers, 2,115 decliners, 1.988 billion shares. 59 new highs, 101 new lows.
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Most Active Stocks
NYSE Most Actives
- AT&T: 27.3 million shares.
Lucent Technologies (LU) - Get Lufax Holding Ltd American Depositary Shares two of which representing one Report: 26.3 million shares.
Nortel Networks (NT) : 24.9 million shares.
Nasdaq Most Actives
- WorldCom: 191.8 million shares.
Cisco: 74.8 million shares.
Oracle: 61.4 million shares.
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Sector Watch
Oil and oil service stocks rallied sharply on rising oil prices, but other commodity-related indices were lousy. The Philadelphia Stock Exchange Oil Service Index gained 5.9% today, led by gains in
R&B Falcon
(FLC) - Get Flaherty & Crumrine Total Return Fund Inc Report
, which rose 6.5%, and
Schlumberger
(SLB) - Get Schlumberger N.V. Report
, which gained 5.3%.
The
S&P Chemical Index
dropped 1.9% and the
Philadelphia Stock Exchange Forest & Paper Products Index
lost 2.3%.
The announcement of a content agreement between
Yahoo!
(YHOO)
and
Dow Jones
(DJ)
lifted the former today, and brought the rest of the Internet stocks with it. Yahoo! rose 10% today on 17 million shares traded, while
eBay
gained 4.9%.
TheStreet.com Internet Sector
index gained 3.9%.
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Bonds/Economy
Bonds were firmer today, with traders continuing to expect that this week's economic data will show further signs of a slowing economy and underpin the bond market's strong performance.
The benchmark 10-year
Treasury note is at 100 1/32, up 4/32, to yield 5.744%.
The 30-year
Treasury bond is at 106 19/32, 3/32 higher, to yield 5.781%.
The October
Purchasing Managers' Index
(
definition |
chart |
) fell to 48.3 from 49.9 in September.
The
Mortgage Applications Survey
(
definition |
chart |
source
) for the latest week rose to 654.6 from 587.2 in the prior period.
Construction spending
(
definition |
chart |
source
) for September rose 2.4%, after a 1.8 % gain in August.
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International
The major European indices were mixed at the close.
The
FTSE 100
in London turned around to end on the upside. It ended up 19.20 to 6457.60
The
CAC 40
in Paris rose 11.39 to 6409.05, while the
Xetra Dax
in Frankfurt ended off 18.37 to 7059.07.
After economic data on Friday showed a slowing U.S. economy, the
battered euro continued to rise. It was lately at 0.8610.
Most Asian
equity markets closed with solid gains Wednesday, as technology shares from Seoul to Hong Kong rallied following the Nasdaq's strong performance Tuesday.
In Tokyo, the
Nikkei 225
closed up 332.8 points, or 2.3%, at 14,872.4.
In Tokyo trading, the dollar traded at 109.16 yen, up from Tuesday's close of 108.99 yen. The greenback was lately at 108.15.
Elsewhere, South Korea's
Kospi
index surged 34.3, or 6.7%, to 548.8, as
SK Telecom
(SKM) - Get SK Telecom Co. Ltd. Report
jumped 13,500 won, or 5.6% to 256,000 ($224.75) and
Samsung Electronics
rocketed 20,500 won higher, or 14.4%, to 163,000.
Hong Kong's
Hang Seng
index rose 453.7, or 3.1%, to 15,349.0, as heavyweights
China Mobile
(CHL) - Get China Mobile Ltd. Report
rose HK$0.25, or 0.5%, to 50.50 ($6.46) and
HSBC
(HBC)
surged HK$4.50, or 4.2%, to 113.00.
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