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Dow beaten down by IBM
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March 19, 1999: 3:24 p.m. ET
Index relinquishes 10,000 and slips into the red after Big Blue raises worries
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NEW YORK (CNNfn) - Weakening technology stocks weighed heavily on the broad stock market in late trading Friday, pushing the Dow industrials into negative territory and once again below the 10,000 mark.
Shortly before 3 p.m. ET, the Dow Jones industrial average, the blue chip index whose dalliances with the five-digit milestone has kept investors on edge this week, was down 28.58 points at 9,969.04.
Weighing heavily on the Dow, shares of IBM plunged after Morgan Stanley Dean Witter lowered its stock price target for Big Blue. The news sent already weakened technology stocks even lower and helped bring the Dow down into the minus column.
The Dow rallied earlier in the day, helped by lingering bullish momentum from Thursday and got an extra boost from Friday's "triple witching" -- the simultaneous expiration of stock index futures and options and individual stock options that happens once every three months. The event is known to create heightened volatility and increased trading volume in the market, especially in the first and last hours of trading.
The late sell-off, however, once again dampened the bulls' hopes that the 30 blue chip index would end the week with its first close above 10,000.
Market breadth on the New York Stock Exchange became more heavily negative, with declines outpacing advances 1,746 to 1,204 on heavy trading volume of 741 million shares.
The Nasdaq Composite fell 27.71 points, or 1.2 percent, to 2,435.25, and the S&P 500 index was down 9.24 at 1,307.31. (Click here for a look at today's CNNfn market movers)
Bonds were lower, falling victim to technically motivated selling. The bellwether 30-year Treasury bond traded 23/32 of a point lower in price, for a yield of 5.53 percent.
The dollar dropped against the yen, weighed down by a rally in Japanese stocks overnight. The dollar gained ground against the euro.
Trouble among the techs
Much of the selling on Wall Street began in the technology sector and picked up late in the day after Morgan Stanley Dean Witter lowered its price target for IBM (IBM) to $195 a share from $210, even while keeping its "outperform" rating on the stock.
The news, which had reached the market in the form of a rumor long before Morgan Stanley confirmed it, sent IBM's stock down 6-3/4 to 170-7/8, a move that was largely responsible for the Dow's slide into the red.
Fellow Dow component Hewlett Packard (HWP) dropped 2-5/8 to 71-3/8. Other high-tech high flyers, most of which had been strong in the morning, followed suit. Microsoft (MSFT) fell 1-3/16 to 171-1/4, Intel (INTC) lost 1-5/16 to 120-1/2, Cisco Systems (CSCO) dropped 1-5/8 to 105-1/4 and Dell Computer (DELL) shed 1-7/16 to 40-13/16.
Among the few tech gainers, Adobe Systems (ADBE) rallied 3-7/8 to 53-5/8 after the software maker reported stronger-than expected first-quarter results and predicted it would beat second-quarter forecasts as well. Brokers Pacific Crest and Hambrecht & Quist upgraded the stock.
Transports in reverse gear
A strong rally in the transportation sector Thursday paved the way for a bit of profit-taking a day later, sending the Dow transports index down 58.78 points, or 1.7 percent, to 3,3744.29.
Among the losers, shares of AMR (AMR), the parent company of American Airlines, fell 1-9/16 to 60-9/16. The stock rallied sharply Thursday, even after the company announced its first-quarter earnings will fall short of expectations because of a week-long pilot job action in February.
Rival UAL (UAL), the parent of United Airlines, eased 1-1/4 to 75-15/16 and Delta Airlines (DAL) dropped 1-15/16 to 68-5/8.
Federal Express (FDX), which on Thursday helped underpin the transportation rally with its strong third-quarter earnings report and the announcement of a 2-for-1 stock split, continued to charge higher, adding 7/8 to trade at 99.
Solid earnings and merger rumors
The rest of Wall Street focused on positive earnings news from several industries including brokers and sneaker makers.
Financial stocks once again attracted heavy trading, as investors focused on strong earnings in the sector and talk one of the industry's premier members, banking giant Chase (CMB) may have set its sight on a specific takeover target.
Still, despite early strength in the sector, the broader market weakness cast its shadow and most financial shares slipped into the red late in the day.
Chase, long rumored to be desperately in search of a merger partner, saw its stock ease 7/8 to 83. In its April 5 issue due on newsstands Monday, Forbes magazine said the venerable bank is negotiating a deal with another Wall Street blue blood, Merrill Lynch (MER). Merrill's shares slipped 3/8 to 91-3/4 after rising on the report.
Meanwhile, Merrill rival Lehman Brothers (LEH) reported its second-best quarterly performance, with earnings jumping 13 percent to $211 million in the first three months of the year. But profit-taking brought Lehman's stock down 3-13/16 to 58-7/16.
Among the Dow's financial members, American Express (AXP) fell 3-7/8 to 123-3/4, plagued by profit taking. Citigroup (C) eased 3/16 to 64-1/2 and J.P. Morgan (JPM) slipped 1/8 to 124-1/16.
Strong earnings helped boost the stock of sports shoe maker Nike (NKE). After several quarters of weakened results, the company said its fiscal third-quarter profit rose to 44 cents a share from 25 cents a year earlier and 6 cents higher than Wall Street had expected. The stock rallied 5-11/16 to 60-11/16, a gain of more than 10 percent. Brokerage Hambrecht & Quist upgraded Nike to "buy" from "hold." BT Alex. Brown upgraded the stock to "buy" from "outperform."
A report in the Japanese newspaper Nihon Keizai Shimbun, suggesting British Telecom (BTY) and AT&T (T) are in talks to buy a combined 30 percent stake in Japan Telecom, sent American depositary receipts of British Telecom up 2-1/2 to 164-1/8. After rising early in the day, however, AT&T, a Dow component, lost 3/4 to 81-3/8. 
-- by staff writer Malina Poshtova Zang
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