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Intel bruises Wall Street
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March 5, 1998: 5:31 p.m. ET
Stocks slide after high-profile chip maker warns of lower profit, revenues
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NEW YORK (CNNfn) - A surprise earnings warning from bellwether chip maker Intel sent shock waves through Wall Street as investors ran for cover Thursday and dumped shares along the way, leading to sharp declines in all major market indicators.
Nervous market players, fearing Intel's announcement could be a precursor to a disappointing first-quarter earnings season, were quick to unload stocks, hitting the technology-saturated Nasdaq Composite especially hard.
"Intel has become a fairly significant barometer," said Alan Hoffman, stock market strategist at Value Line Asset Management.
The Nasdaq shed 47.78, or 2.72 percent, to 1,711.92, knocked down by Intel's gloomy forecast, ending only 3 points away from the day's lowest level.
The Dow Jones industrial average lost 94.16 points, or 1.1 percent, closing at 8,445.08. On the New York Stock Exchange, losing stocks sharply outnumbered gainers 2,139 to 798, as 649 million shares changed hands.
The broader S&P 500 index fell 12.29, or 1.17 percent, to 1,035.04. (Look here for the performance of widely held stocks.)
Bonds fell as few investors shifted funds into less volatile debt securities and many exited the market ahead of Friday's key February employment report.. The price of the benchmark 30-year Treasury bond fell 14/32 of a point, raising the yield to 6.06 percent.
The dollar rose against the Japanese yen, supported by an overnight slide in Asian markets, caused by Intel's bombshell warning. The greenback also firmed against the German mark after a German central banker said his country's high unemployment may lead to an interest rate cut.
The party's over
Minutes after the closing bell Wednesday, Intel (INTC), the world's premier chip maker, sent chills through Wall Street by warning its first-quarter profit will be smaller than expected and revenues will be about 10 percent lower than those in the fourth quarter. On Thursday, shares of Intel plunged 10-15/16, or 12.6 percent, to 75-1/2, wiping out nearly $19.5 billion from the company's market capitalization.
Following the news, a flock of Wall Street analysts downgraded Intel's stock and lowered their earnings expectations. The group included Merrill Lynch, Deutsche Morgan Grenfell and BT Alex Brown, and Credit Suisse First Boston. First Call lowered its consensus estimate for Intel's first-quarter earnings to 71 cents a share from 93 cents a share, and the full-year 1998 earnings projection to $3.22 a share from $3.92 a share.
Intel was the most actively traded stock on the Nasdaq as 92 million shares of the company were traded, a record one day volume for the chip maker.
But Lou Ehrenkratz, market strategist at Ehrenkrantz King Nussbaum, said Wall Street's reaction to Intel's bad news was overstated. (388K WAV) or (388K AIFF)
Other technology stocks followed suit, stung by Intel's chilling announcement. Dell Computer (DELL) shed 7-3/16, or more than 5 percent, to 131-7/8, Microsoft (MSFT) fell 2-1/4 to 80-1/16 and Compaq (CPQ) was down 7/8 to 27-1/8. Shares of Texas Instruments (TXN) tumbled 2-1/4 to 52-3/4 after a company official told Reuters wire service that slow orders are putting pressure on revenues and profit margins.
Shares of semiconductor makers also were hit, with VLSI Technology (VLSI) losing 3/4 to 18-3/8 and Lattice Semiconductor (LSCC) tumbling 6-1/4, or nearly 12 percent, to 46-1/2.
But other Intel rivals managed to escape the Intel plague, with Micron Technology (MU) gaining 1-13/16 to 34-13/16. Shares of Advanced Micro Devices (AMD), a company that has been trying to take a bite out of Intel's market share, rose 1/2 to 21.
Dow component IBM (IBM) lost only 1/16 to 98-15/16.
But shares of Computer Sciences (CSC) joined in the tumble, losing 11-7/8, or more than 11 percent, to 93-1/8, as would-be hostile buyer Computer Associates (CA) said it would allow its uninvited $9 billion bid for Computer Sciences to expire as scheduled on March 16. The stock of Computer Associates rose 1-7/16 to 49.
Finally, a newcomer topped the net gainers list on the Big Board, as shares of Waddell & Reed (WDR), an investment management company, rose to 26-7/8, gaining nearly 15 percent after pricing at 23 during its initial public offering.
-- by staff writer Malina Poshtova Zang
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