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U.S. stocks slip
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June 27, 2000: 5:02 p.m. ET
Investors await Fed rate comments; IBM leads tech sell-off on Dow, Nasdaq
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - A late tech sell-off pushed U.S. stocks lower Tuesday, led by IBM, as the start of the Federal Reserve's two-day monetary policy meeting kept many investors sidelined.
Analysts said investors were not showing a great deal of interest in actively buying stocks as they awaited affirmation that interest rates will remain unchanged.
The consensus is that rates will be left alone, prompting some investors to regain confidence in the leaders of the interest-rate sensitive sectors, like retail. But optimism wasn't enough to stave off a late tech sell-off which started with IBM getting slammed after Merrill Lynch cut its revenue growth forecast.
 "There was rotation out of the strong sectors into the weak sectors," said Barry Hyman, chief market analyst at Ehrenkrantz King Nussbaum. "Techs really got hammered. Volatility, up and down, means there are just as many sellers as buyers, and people think the (semiconductor) sector might be a little pricey, especially as we come into an economic slowdown."
IBM, Intel and Hewlett-Packard led the tech sellers on the Dow Jones industrial average. The tech selling spilled into semiconductor stocks to send the Nasdaq composite index down.
The Dow shed 38.53 points to 10,504.46. The Nasdaq lost 53.16, or more than 1.3 percent, to 3,858.96, while the S&P 500 fell 4.70 to 1,450.55.
Market breadth was mixed. Advancers still beat decliners on the New York Stock Exchange 1,584 to 1,354 as more than 1 billion shares changed hands. On the Nasdaq, losers topped winners 2,339 to 1,685 on volume of more than 1.4 billion shares.
In currency markets, the dollar weakened against the yen and the euro. Treasury securities advanced slightly.
Investors await Fed rate comments
The Federal Open Market Committee, the Fed's monetary policy-making body, started its two-day meeting Tuesday. Wall Street has been waiting for weeks to see whether the Fed will stop a year of rate hikes.
"I'm thinking the Fed will leave the rates unchanged," said Art Hogan, chief market analyst at Jefferies & Co. "We've ramped up pretty higher into this meeting and my concern is the psychological letdown if the rhetoric remains strong."
After six interest rate hikes in the past year, most analysts expect the Fed to leave rates unchanged. They also believe investors will focus on what the Fed has to say as opposed to what it does at this time.
"People are waiting for the Fed," said Alan Skrainka, chief market strategist at Edward Jones. "I think the Fed will leave rates alone, probably say that the risks are tilted toward inflation and people are also saying they'll come back in August and hike again."
And Ehrenkrantz's Hyman said that investors should maintain a short-term investing strategy until the signals become clearer that an economic slowdown has taken hold. "I am not looking at long-term because it is working against investments. There's certainly going to be an implied warning (by the Fed) which means that we're 'on hold' until August."
IBM sell-off drags other techs down
Leading the selling spree, IBM (IBM: Research, Estimates) slumped 4-21/32 to 109-3/4 after Merrill Lynch analyst Steve Milunovich cut his estimate of IBM's second-quarter revenue growth and reduced its rating from "long-term buy" to "accumulate."
Other Dow tech components sold off. Hewlett-Packard (HWP: Research, Estimates) fell 3-1/18 to 116-7/8 and Intel (INTC: Research, Estimates) shed 2-13/16 to 131-3/8.
"The blue-chips just turned down," said Hyman. "Regardless, the retailers were up but really not enough to carry the market."
Despite the spate of sellers, the retail sector attracted a modicum of buyers. Wal-Mart (WMT: Research, Estimates) gained 3-1/16 to 57-13/16 and Home Depot (HD: Research, Estimates) jumped 2-9/16 to 49-11/16.
 WorldCom (WCOM: Research, Estimates) rose 2-1/8 to 39-5/8 after the Justice Department filed suit to block its proposed $129 billion purchase of rival Sprint (FON: Research, Estimates). The company also said the merger has been withdrawn from European Union consideration, although there's no word as to whether the companies are terminating the deal. Sprint shares slid 1-3/16 to 58-3/8.
Buying in WorldCom wasn't enough to keep the Nasdaq tech sellers at bay. "Nasdaq is really a mixed bag," said Scott Bleier, chief investment strategist at Prime Charter. "The Fed debate is why the market can't put a convincing rally together."
Semiconductors took a beating. Applied Materials (AMAT: Research, Estimates) dropped 1-3/8 to 88-1/8 and PMC Sierra (PMCS: Research, Estimates) lost 5-13/16 to 182-7/8.
 The selling prompted other tech issues to falter. JDS Uniphase (JDSU: Research, Estimates) fell 6-9/16 to 109-1/16 while Sun Microsystems (SUNW: Research, Estimates) lost 3 to 87-7/16.
Still, Louis Holland, chief investment officer at Holland Capital Management in Chicago, told CNNfn's market coverage he is betting that technology stocks will recover. (392K WAV) (392K AIFF). 
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