|
More losses for Nasdaq
|
 |
February 20, 2001: 5:17 p.m. ET
Technology stocks sell off for another day amid continued economic uncertainty
By Staff Writer Jake Ulick
|
NEW YORK (CNNfn) - The Nasdaq composite index tumbled to its lowest level in seven weeks Tuesday as investors bet that a slowdown in technology spending by consumers and businesses will continue to erode corporate profits.
JDS Uniphase, Juniper Networks and Nextel Communications all faltered, sending the Nasdaq further into negative territory for the year after its worst annual performance on record in 2000.
The losses continued from Friday, when profit or sales warnings from Nortel Networks, Dell Computer and Hewlett-Packard cast more doubt on the economy's health.
 Technology stocks, still the market's most expensive shares, once again proved prone to the biggest sell-offs. Sparking the selling, several Wall Street brokerages Tuesday further slashed profit forecasts for many firms, including the communications chip makers Applied Micro Circuits and PMC Sierra.
Faced with a deteriorating economy, Clark Yingst, market analyst at Prudential Securities, told CNN's Street Sweep that he's reluctant to pick the market's bottom.
"These earnings estimates are falling in some cases in as fast as the (stock) prices," Yingst said.
By contrast, retail and drug stocks rose Tuesday, keeping the losses on the Dow Jones industrial average in check.
The Nasdaq composite index tumbled 107.03 points, or 4.4 percent, to 2,318.35, handing the index its lowest close since Jan. 3, when the Nasdaq ended at 2,291.86.
 The Dow Jones industrial average lost 68.94 to 10,730.88 while the S&P 500 fell 22.59 to 1,278.94.
More stocks fell than rose. Declining issues on the New York Stock Exchange outpaced advancing ones 1,756 to 1,325 as 1 billion shares traded. Nasdaq losers beat winners 2,506 to 1,308 as 1.8 billion shares changed hands.
In other markets, Treasury securities ended little changed. The dollar rose against the euro but fell versus the yen.
More tech setbacks
Among the day's technology losers, JDS Uniphase (JDSU: Research, Estimates) tumbled $1.63 to $34.19, its lowest level in 16 months.
Lehman Brothers cut 2001 earnings estimates on the maker of fiber-optic components to 72 cents a share from 74 cents, citing uncertainty about the March quarter. U.S. Bancorp Piper Jaffray slashed JDS Uniphase's stock rating to "neutral" from "strong buy."
Juniper Networks (JNPR: Research, Estimates), which makes routers for Internet service providers, declined $5.25 to $74.75, while Ciena (CIEN: Research, Estimates), a maker of optical networking equipment, lost $5.31 to $77.31.
 The two stocks fell for a second day on the heels of negative financial news from Nortel Networks. Nortel, the big communications equipment maker, late Thursday said slowing demand for its products will cause it to post a first-quarter loss. Analysts expected a profit.
Nortel Networks (NT: Research, Estimates) fell an additional $1.13 to $18.87, extending a 30 percent-plus slide from Friday.
Brokerage downgrades hurt two makers of communications chips. Applied Micro Circuits (AMCC: Research, Estimates) fell $5.75 to $38.06 after Credit Suisse First Boston cut its rating to "buy" from "strong buy," and PMC-Sierra (PMCS: Research, Estimates) fell $7.88 to $44.63. Credit Suisse lowered its rating on PMC Sierra rating to "hold" from "buy". Lehman Brothers reduced its profit forecasts for both companies.
Nextel Communications (NXTL: Research, Estimates), meanwhile, lost $3.13 to $22.31 after Salomon Smith Barney downgraded shares of the wireless communications provider to "outperform" from "buy" and cut its price target on the stock to $35 from $48.
The broad tech losses come as the severity of the U.S. economy's slowdown has taken many by surprise. Consumer confidence has faltered amid a tumbling stock market and increased corporate layoffs. The manufacturing sector has shrunk even as the Federal Reserve slashed interest rates by a full percentage point in January.
After falling 39.2 percent last year, the Nasdaq now is down 6.2 percent on the year. The S&P 500, a broader index, is 3.2 percent lower in 2001.
But despite the losses, tech stocks still are expensive. Cisco Systems, for example, trades at 40 times this fiscal year's earnings estimates of 65 cents per share, even as the stock has fallen 68 percent from its 52-week high.
"You are seeing an unwillingness of investors to step up and pay for expensive technology names in light of the economic uncertainty over the next few quarters," Bryan Piskorowski, another market analyst with Prudential Securities, told CNNfn's market coverage.
Still, at least one market watcher sees a floor on the market.
"If the market sells-off enough, you'll see those buyers come back in," said Peter Coolidge, senior trader with Brean Murray & Co.
Wednesday brings a key test. A Nasdaq close below 2,291.86, takes the index to nearly a two-year low.
On the Dow, Hewlett-Packard (HWP: Research, Estimates) fell $2.63 to $30.50, continuing losses from last week, when the computer and printer maker lowered its sales and profit forecasts. After the close of trading, Agilent Technologies, a Hewlett spinoff, said it earned $237 million, or 51 cents per share, during the quarter ended Jan. 31, beating forecasts by a penny.
Problems also continued another PC-related stock. Dell Computer (DELL: Research, Estimates), which last week reported quarterly results that fell short of expectations and lowered its financial targets for the current quarter, slid $1.50 to $22.
But investors found safety in retail stocks. Home Depot (HD: Research, Estimates) rose $1.09 to $44.09 while Wal-Mart (WMT: Research, Estimates) advanced $1.04 to $53.40.
Home Depot said fourth-quarter profit fell to $465 million, or 20 cents a share, meeting analysts' lowered expectations. Fourth-quarter profit at Wal-Mart rose to $2 billion, or 45 cents a share, topping Wall Street targets by a penny a share.
Perhaps the best news for investors involved the two retailers' corporate outlooks. Both companies, whose stocks are well off their 52-week highs, countered the recent trend by giving no negative news about future profitability.
Art Hogan, chief market strategist at Jefferies & Co., likes retail stocks, which he says should do well as interest rates fall. Many economists forecast the Federal Reserve will cut interest rates again next month.
"We are in an environment with friendlier interest rates," Hogan said.
Drug stocks, defensive issues that were some of last year's best-performing shares, also rose. Merck (MRK: Research, Estimates) gained 61 cents to $78.26, while Johnson & Johnson (JNJ: Research, Estimates) climbed $1.17 to $77.90.
The next important read on the economy comes Wednesday. The Labor Department's consumer price index is expected to rise 0.3 percent in January, according to economists surveyed by Briefing.com, following 0.2 percent gain the prior month.
Just Friday, prices at the wholesale levels jumped a surprising 1.1 percent in January.
Inflation has remained relatively in check. But that latest rise in the Producer Price Index dashed some hopes that the Federal Reserve can aggressively cut rates, only adding to the pessimism of stock investors who want a turnaround in the darkening profit picture.
But Gregg Hymowitz, money manager at EnTrust Capital, says this bad mood may be an opportunity.
"The fact that everyone is so negative, that's when you want to be stepping in," he told Street Sweep. 
|
|
|
|
|
 |
|
