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Nasdaq falls under 4,000
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September 8, 2000: 4:39 p.m. ET
Chip sellers send tech index plunging; Dow slips on oil price concerns
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - The Nasdaq composite index plunged below 4,000 for the first time in two weeks Friday, as investors dumped semiconductor stocks amid concerns about the pace of revenue growth.
"What we have is a dichotomy on a short-term basis. We have the Nasdaq that has declined below the prior week's low so I can say with confidence that the Nasdaq has topped out," Joseph Kleinerman, global market analyst at Chase Securities Inc., told CNNfn's market coverage.
The Nasdaq fell 119.03, or nearly 3 percent, to 3,979.32, its first close under 4,000 since August 25. The composite dropped 6 percent this week.
 The Nasdaq bounced around its critical 4,000 level throughout the session. Analysts said the close below 4,000 created a negative sentiment, but they expect the composite to remain stuck in its current trading range until some fundamental catalyst emerged to breathe some life into the index.
"Technically, the Nasdaq is trying to hold important support at 4,000 but it hasn't broken out of its trading range," said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum. "One of the reasons it hasn't broken out is this semiconductor/chip story -- it's going to keep that index rather subdued."
The Dow Jones industrial average fell amid worries about the adverse effect rising oil prices will have on revenue growth for cyclical stocks.
Clouding the oil picture was this weekend's OPEC meeting in Vienna, Austria, at which ministers were expected to announce increased output to halt the surge in oil prices.
"We're seeing pre-releases starting in 'old economy' stocks - companies that are not leading-edge tech companies but are more affected by this dramatic rise in energy prices," said Hyman.
 The Dow industrials slipped 38.11 to 11,221.76, while the S&P 500 shed 7.87 to 1,494.64. The blue chip index shed 0.15 percent while the S&P slipped 1.7 percent for the week.
Market breadth was negative. On the New York Stock Exchange, decliners outpaced advancers 1,519 to 1,304, as more than 962 million shares changed hands. On the Nasdaq, losers nudged out winners 2,498 to 1,514, as more than 1.4 billion shares were traded.
In currencies, the dollar was stronger versus both the euro and the yen. Treasury securities mostly rose.
Crumbling chips
Semiconductors fell out of favor with investors after attempting to stage a rebound in the previous session. The Philadelphia Semiconductor Index fell nearly 5 percent, dropping 54.33 points to 1,040.17 Friday.
"I think there's enough in the cyclicality issue that it's going to be more of a traders' market," said Hyman, referring to the semiconductor sector. "I think there's enough confusion out there that so much depends on the third-quarter earnings that we actually do see."
Intel (INTC: Research, Estimates) lost $2.06 to $66.38, PMC Sierra (PMCS: Research, Estimates) fell $10.25 to $214.88, and Applied Materials (AMAT: Research, Estimates), which makes equipment for semiconductors, shed $4.88 to $75.50.
In a semiconductor conference call late Thursday, Merrill Lynch said large chip equipment suppliers, such as Applied Materials, were refusing to significantly ramp up capacity as aggressively as they had during the last cycle.
 The two biggest losers on the Dow were United Technologies (UTX: Research, Estimates), which shed $1.63 to $61.78, and 3M (MMM: Research, Estimates), which fell $1.69 to $89.94.
For the second straight session, DuPont (DD: Research, Estimates) took a hit, dropping $1.19 to $40.94.
Adding to DuPont's woes, just one day after it issued a profit warning, PaineWebber lowered its target price for the chemical maker to $55 from $70.
Cyclical stocks, such as those found on the Dow, would be hurt hardest by higher oil prices. "The market is a bit nervous going into the OPEC meeting, but the real nervousness stems from the fact that we got some more earnings warnings which is making the market quite defensive," said Peter Cardillo, director of research at Westfalia Investments.
In New York trading, U.S. light sweet crude fell $1.24 to $34.15 a barrel, backing off the near 10-year high reached Thursday.
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One bright spot, which attracted buyers, was the financial services sector. American Express (AXP: Research, Estimates) rose $1.31 to $60.63 after saying it soon would enable its cardholders to avoid revealing account numbers when making online purchases, to combat Internet shopping fraud.
Other financial issues followed suit. J.P. Morgan (JPM: Research, Estimates) -- the subject of takeover speculation this week -- gained $1 to $164. Citigroup (C: Research, Estimates), which earlier this week announced the proposed acquisition of Associates First Capital, advanced $1.25 to $56.
TRW, Ford take the high road
With little fundamental news propelling the major indexes in any direction, analysts said investors would be reacting to individual corporate news as they sought safe havens for their money.
TRW (TRW: Research, Estimates) gained $3.56 to $43.81 despite warning late Thursday that its third-quarter earnings would fall as much as 23 percent below analysts' expectations -- in part because of production cutbacks by Ford Motor Corp. and lower-than-expected revenue in its space and electronics business.
 Ford (F: Research, Estimates) gained 13 cents to $26 after saying it is planning to reopen three of its plants Monday as it tries to get back on track from the Firestone tire recall that has hurt its revenue and led Wall Street analysts to cut earnings estimates for the world's second-biggest automaker. 
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