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Tech sellers beat Nasdaq
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May 3, 2000: 5:07 p.m. ET
Profit warnings, inflation fears prompt selling; retail stocks push Dow down
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - Investors stayed on the selling path Wednesday, dumping technology and retail stocks, sending the Nasdaq composite index and the Dow Jones industrial average plummeting for the second straight session.
Analysts said it was a continuation of the previous session in an environment of growing inflationary concerns with any negative news spooking a sell-off.
"There doesn't seem to be any one trigger. The idea of technology being such a high growth area is true but maybe revenue growth isn't as robust as anticipated," said Charles Crane, chief market strategist at Key Asset Management. "It's more one of anxiety by investors that evidence is mounting the Fed may need to be more aggressive."
Inflationary fears are on investors' radar screens as they await Friday's release of the April employment report, a key economic indicator that could provide some insight into what the Federal Reserve may do with interest rates later this month.
 The Nasdaq shed 78.14 points, or more than 2 percent, to 3,707.31. The index has fallen 6 percent over the previous two sessions but is still up 16 percent from its low of 3,227 on April 17.
The Dow slipped 250.99 points, or more than 2 percent, to 10,480.13. The broader S&P 500 lost 31.19 to 1,415.10.
 Volumes were moderate and market breadth was negative. Decliners beat advancers on the New York Stock Exchange 2,164 to 816, as more than 989 million shares changed hands. Losers topped winners on the Nasdaq 2,759 to 1,283, on volume of more than 1.5 billion shares.
In currency markets, the dollar strengthened against the euro and the yen. Treasury securities drifted lower.
Wary investors dump tech stocks
Jittery investors sold off technology issues amid renewed concerns over future revenue growth. Once again, the harsh reminder that Wall Street is unforgiving in the face of any negative news was evident.
"As long as value remains stretched in the more speculative end of technology, anything that blemishes it will prompt an emotional sell-off," said Crane.
Louise Yamada, senior technical analyst at Salomon Smith Barney, told CNNfn's market coverage that the short-term response to the recent technology sell-off will be some range trading -- something she views as a positive. (425K WAV) (425K AIFF).
Novell (NOVL: Research, Estimates) declined 6-7/8 to 10-11/16 after warning that its fiscal second-quarter profit would fall short of expectations. The software maker anticipated reporting earnings of 8 cents a share for its quarter ended April 30, half of the forecast 16 cents a share and compared with the 11 cents a share a year earlier.
Cisco Systems (CSCO: Research, Estimates) lost 1-15/16 to 66-1/16, Intel (INTC: Research, Estimates) dropped 2-1/8 to 119-1/16, and Oracle (ORCL: Research, Estimates) shed 1-7/8 to 75-15/16.
Analysts said that the selling lacked conviction and bargain hunters have been sitting on the sidelines ahead of fresh economic news.
"It's really no surprise to see a sell-off," Lisa Cullen, U.S. investment strategist with Merrill Lynch, told CNNfn's market coverage. "It's really hard to figure out where the market's head is at."
 The Dow skidded lower as investors sold off retail issues, after Goldman Sachs downgraded 17 retail companies.
"Less well positioned more cyclical retailers, including many department stores, may fall short of investor expectations in 2000," wrote Goldman Sachs analysts in a research note. "For the most part, stocks of such companies have already been discounted to record low levels relative to the market; we see no catalyst, however, to get them moving."
Among the losers were the Dow's two main retail components: Wal-Mart (WMT: Research, Estimates) fell 3-7/8 to 53-3/4, and Home Depot (HD: Research, Estimates) slid 2-15/16 to 53-7/8.
Among other retailers, Costco Wholesale Corp. (COST: Research, Estimates) slumped 2-9/16 to 52-3/16 and Federated Department Stores (FD: Research, Estimates) fell 5/8 to 34-11/16.
 "The growth end seems expensive and the value end doesn't look good either," said Crane. "The overall market has been well supported by enthusiasm for technology but the gloss has been tarnished on the whole technology juggernaut."
But hungry investors were still biting as BestFoods (BFO: Research, Estimates) jumped 10-7/8 to 61-7/16, after rejecting an unsolicited $18.4 million bid from Unilever (UN: Research, Estimates), which recently completed acquisitions of Slim-Fast and Ben & Jerry's. BestFoods brands include Hellmann's mayonnaise and Skippy peanut butter. Unilever shed 2-7/16 to 43.
Economic data weighs on inflation woes
Analysts said investors are keenly watching leading economic indicators to gauge where interest rates may be headed ahead of the Federal Reserve's May 16 meeting on monetary policy.
Investors had been selling "old economy" stocks in favor of technology issues, viewed as less sensitive to interest rate hikes but sentiment may be changing as investors begin to realize that capital cost is capital cost.
"Technology has looked like it's quite immune to the machinations of the Fed but I think people have gotten complacent," said Merrill Lynch's Cullen. "The Internet companies are very dependent on a constant flow of venture capital."
In an economic report issued Wednesday, orders placed with U.S. manufacturers regained momentum in March, indicating that demand for American-made goods remains strong.
Orders at U.S. factories jumped 2.2 percent, the Commerce Department said, above the 1.5 percent gain economists polled by Briefing.com had expected, and also above the revised flat reading registered the month before. February's orders were originally reported as a 0.8 percent drop. Excluding transportation, orders rose 1.9 percent after gaining 1.5 percent in February.
"My feeling is the economy is going to slow, either on its own or by the Fed," said Al Goldman, director of technical market analysis at A.G. Edwards. "If you think interest rates are going to be raised steadily, that's not good for anybody, but a modest increase does not hurt technology." 
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