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Nasdaq losses continue
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May 9, 2000: 5:02 p.m. ET
Investor keep shedding tech stocks, concerned about valuations and Fed
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Nasdaq composite index fell for the second day in a row Tuesday, as investors wary about steep valuations unloaded high-priced technology stocks.
The selloff spread to the Dow Jones industrial average as money continued fleeing tech stocks with lofty price-to-earnings ratios -- just seven days ahead of an expected interest rate hike by the Federal Reserve.
"It's just continuing worry about valuation," said Kenneth Sheinberg, head of listed trading at SG Cowen Securities.
Citing no fresh news behind the sell-off, analysts trace the most recent losses to Monday, when investors dumped technology shares after a published report questioned whether stock in bellwether Cisco Systems is too expensive.
 "When you throw rotten tomatoes at a queen bee like Cisco, it splashes over on everyone else," said Al Goldman, chief market analyst at A.G. Edwards.
The Nasdaq fell 84.37 points, or 2.3 percent, to 3,585.01, hit by losses in Sun Microsystems, Dell Computer and JDS Uniphase.
The Dow Jones industrial average shed 66.88 to10,536.75, pulled lower by Microsoft and Hewlett-Packard.
The broader S&P 500 fell 12.03 to 1,412.14.
More stocks fell than rose in another session of light trading volume. Declining issues on the New York Stock Exchange edged out advancing ones, 1,581 to 1,289. Just 892 million shares changed hands. Nasdaq losers topped winners, 2,706 to 1,368, as trading volume reached 1.4 billion shares.
In other markets, Treasurys rose as investors sought safety in fixed-income securities. The dollar fell against the euro but gained versus the yen.
Tech selloff resumes
Investors Tuesday fled technology shares with high price-to-earnings ratios. Among them, Sun Microsystems (SUNW: Research, Estimates) shed 3-1/4 to 82-1/8, Dell Computer (DELL: Research, Estimates) dropped 1-1/8 to 46-13/16 and JDS Uniphase (JDSU: Research, Estimates) lost 2-9/16 to 85-13/16. All trade at more than 65 times earnings.
 Cisco Systems (CSCO: Research, Estimates) ended unchanged at 62-3/4 just moments ahead of its release of fiscal third-quarter results. Cisco ultimately earned 14 cents per share in its fiscal third quarter, a penny better than expectations.
The lack of action in Cisco stock comes a day its shares fell 7 percent following a Barron's magazine article that called the stock overvalued.
Bernadette Murphy, market analyst at Kimelman & Baird, told CNNfn's market coverage that reaction to the story was exacerbated by a jittery market. (271K WAV) (271K AIFF).
Reflecting that nervousness, trading volume remained light as investors showed reluctance to take big positions ahead of next Tuesday's meeting of Fed policy makers.
"There's a total lack of conviction," SG Cowen's Sheinberg said. "There's no news coming out, earnings are done and most of the players are in a wait-and-see mode."
 With last Friday's April jobs report showing surprising strength, many analysts now forecast an aggressive half-point interest rate hike next Tuesday.
Weighing on the Dow Tuesday, Microsoft (MSFT: Research, Estimates) dipped 2 to 67-13/16, and Hewlett-Packard (HWP: Research, Estimates) shed 2-7/8 to 132-13/16.
Wal-Mart, Coca-Cola gain
While higher interest rates can hurt corporate profitability by raising corporate borrowing costs, investors found selected values Tuesday, mostly in "old economy" stocks.
Wal-Mart (WMT: Research, Estimates) jumped 5/8 to 53 after the retailer posted a profit of 30 cents a share in its fiscal first quarter. That was a penny above First Call estimates and better than the 25 cents a share in the year-earlier period.
Fellow Dow member Coca-Cola (KO: Research, Estimates) rose 2 to 50-1/2 after Goldman Sachs upgraded the beverage maker to its "recommended list" from "market perform."
Many money managers are positioning themselves for an environment of tighter credit.
With interest rates going higher, Wayne Hummer, market strategist at Wayne Hummer, is sticking with defensive stocks like real-estate investment trusts and drug makers seen as less sensitive to an economic slowdown.
 Specifically, he likes Summit Properties (SMT: Research, Estimates) and Bristol-Myers Squibb (BMY: Research, Estimates).
When it comes to tighter credit hurting technology stocks, "we have yet to see the full market impact," he told CNNfn's market coverage. 
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