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Nasdaq off 20% this year
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October 10, 2000: 5:20 p.m. ET
Another day, another tech sell-off, this time amid chip stock downgrades
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Nasdaq composite index tumbled for a fourth session Tuesday, coming within 76 points of its lowest close of the year, on fresh fears that sales among technology companies will slow in the months ahead.
In the latest catalyst, Lehman Brothers and Salomon Smith Barney downgraded shares of two chip makers, Altera and Xilinx, and warned their financial results may prove disappointing.
Altera's and Xilinx's big losses spread to Intel and Applied Materials, two of Nasdaq's biggest movers and helped cap nearly six consecutive weeks of stock market declines.
"We're in a skittish market and the last thing you want to do is surprise investors," Paul Meeks, manager of the $6 billion Merrill Lynch Global Technology Fund, told CNNfn's Talking Stocks.
That skittishness could resume Wednesday. Lucent Technologies after the close of trading Tuesday became the latest company to ready Wall Street for weaker-than-expected financial results.
 After nine years of growth, the U.S. economy's record expansion is slowing. Amid this cooling climate investors are unloading technology stocks, which this spring rose to heights beyond historical precedent.
"The (stocks) with the highest (price-to-earnings) take that news the hardest," Gail Dudack, chief investment strategist at UBS Warburg, told CNN's Street Sweep, referring to news of the cooling economy.
Dudack recommends that bargain hunters wait for more possible losses before buying stocks.
The Nasdaq dropped 115.03 points, or 3.4 percent, to 3,240.53, bringing its losses for the year to 20 percent. The latest decline puts the index within sight of its lowest close of the year: 3,164.55, on May 23.
Still, money Tuesday moved into drug and oil stocks, traditional defensive issues that have helped the Dow Jones industrial average outperform the Nasdaq this year. Investors seeking safety also snapped up fixed-income securities, sending Treasurys higher.
 The Dow shed 44.03 to 10,524.40 and is down 8 percent on the year, but was the only major stock index to rise in the third quarter. The S&P 500 lost 16.14 to 1,385.89 and is 6 percent lower for 2000.
More stocks fell than rose. Declining issues on the New York Stock Exchange beat advancing ones 1,684 to 1,142, as more than 1 billion shares changed hands. Nasdaq losers topped winners 2,635 to 1,307, as more than 1.8 billion shares changed hands.
In other markets, the dollar declined against the yen and euro.
The chips are down
In two of Nasdaq's biggest losers, Xilinx (XLNX: Research, Estimates) and Altera (ALTR: Research, Estimates) shed about a quarter of their market values after Lehman Brothers downgraded them to "neutral" from "outperform." Lehman analyst Dan Niles can often affect stocks, and Tuesday was no exception.
Xilinx lost $16.69, or 21 percent, to $62.44 and Altera shed $11.06, or 27 percent to $29.81. Salomon Smith Barney also lowered its rating on the stocks to "market outperform" from "buy."
Both firms raised concerns about slowing growth among the two chip makers, affecting the entire sector of companies that supply components for computers, cell phones and pagers.
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Applied Materials (AMAT: Research, Estimates) shed $6.69 to $49.06.
And Intel (INTC: Research, Estimates), the world's biggest chip maker, declined $1.50 to $37.56. The company, a Dow stock, has lost more than a third of its value since warning last month of slower-than-expected revenue growth.
But Intel is just one of many companies this fall that have readied Wall Street for disappointing financial results for the third quarter, ended in September.
Many tech shares once seemed unstoppable, surging this spring on optimism for fast-paced growth rates. But a combination of rising oil prices, higher interest rates, a weak euro and a blitz of earnings warnings has sent the sector, still the Wall Street's most expensive, tumbling.
Some analysts also blame history.
"I think October is probably the shakiest month of the year in the stock markets," John Burnham, chairman and CEO of Burnham Securities, told CNNfn's Market Coverage.
Explaining the losses, Burnham said mutual funds this month are selling losing stocks for tax purposes, meaning that weak stocks get weaker.
With dozens of companies poised to release third-quarter results this week, some see the reports as a possible catalyst to lift a market that has fallen steadily since the end of August. But those optimists will have to wait.
Yahoo! (YHOO: Research, Estimates), which reported third-quarter earnings after the close of trading Tuesday, fell $3.06 to $82.69 in regular trading. The leading Internet eventually posted a profit of 13 cents a share, beating forecasts by a penny.
And Motorola (MOT: Research, Estimates) shed 63 cents to $26.38. The cell phone maker is seen reporting earnings of 26 cents a share later Tuesday, up from 16 cents a year earlier.
Click here for a list of upcoming earnings reports.
And the warnings weren't over. In addition to Lucent's late disappointment, Silicon Graphics (SGI: Research, Estimates) said it now expects a fiscal first-quarter operating loss that's twice as large as analysts' current expectations. Shares of the maker of computer network servers and advanced graphics computers fell 32 cents to $3.56.
Ned Riley, chief investment strategist at State Street Global Advisors, referred to the popular TV show "Survivor" in telling CNNfn's Market Call that technology stocks are in the midst of a major shakeout. (312K WAV) (312K AIFF).
And in yet another market negative, oil prices, whose recent gains have meant steeper costs for business and consumers, rose again Tuesday. Oil futures advanced $1.22 to $32.32 a barrel.
Exxon Mobil (XOM: Research, Estimates), a Dow stock, rose with the price of oil, gaining $2.13 to $93.25. Drug stocks, one of the year's best performing sectors, also rose, with Johnson & Johnson (JNJ: Research, Estimates) jumping $3.31 to $94.63, while Merck (MRK: Research, Estimates) rose $1.63 to $76.94.
One potential deal crossed the wires Tuesday. National Discount Brokers Group (NDB: Research, Estimates) said a unit of Deutsche Bank AG has offered to purchase the online brokerage for $49 a share in stock, almost double its closing share price Monday. The shares reacted accordingly, rising $22.44 to $47.69. 
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