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Markets & Stocks
Nasdaq flirts with 2000
March 9, 2001: 4:29 p.m. ET

Sales warning from chipmaker Intel sends tech stocks tumbling; Dow also falls
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - The Nasdaq composite index tumbled to its lowest levels in almost 27 months Friday, after a sales warning from leading chipmaker Intel sparked a broad tech sell-off  and a strong U.S. jobs report added to the downward pressure in the overall market.

It was definitely not a day of celebration for the tech-heavy Nasdaq, which, just one year ago, hit an all-time high of 5,048. It took only 12 months for the index to shed nearly 3,000 points, or roughly 59 percent.

"With a market as nasty and negative as it is at the moment, there's little room for error," Alan Ackerman, senior vice president with Fahnestock & Co., said. "The Nasdaq has contracted very sharply in a short period of time. Its drop in a year is approximately 60 percent, but this is not representative of all companies that are publicly traded."

graphicThe Nasdaq composite index fell 115.95, or more than 5 percent, to 2,052.78 during Friday's session, its lowest level since Dec. 17, 1998, when it closed at 2,043.88. For the week, the index is down 3 percent.

And, for one day at least, the Dow Jones industrial average didn't fare much better, falling more than 200 points -- its biggest one-day point loss since mid-December.

The Dow fell 213.63, or almost 2 percent, to 10,644.62. But the blue chip index was up 1.7 percent for the week.

The Standard & Poor's 500 index shed 31.32, or more than 2 percent, to 1,233.42 and flat for the week.

The selling came in a week of mixed reactions to bad news, but Intel's leadership position was enough to send investors on a selling spree throughout the session.

graphicAnd the strength in the jobs report raised concerns that the Federal Reserve may not be as aggressive with interest rate cuts as had been hoped.

"Negative guidance from Intel kicked off a new selling wave in beleaguered technology, while the February job figures turned out to be strong enough to raise some doubts about aggressive Federal Reserve ease," wrote Larry Wachtel, market analyst with Prudential Securities.

But analysts said investors do not need to run for the hills in a panic.

"I think stocks really are near their lows at this point and I think investors are bargain-oriented right now," said Seth Martin, equities analyst with IDEAglobal.com. "They believe in some sort of comeback by the end of this year so if you believe in that, you have to like stocks at these prices."

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers 1,987 to 1,084 as more than 1.07 billion shares were traded. Losers outpaced winners on the Nasdaq 2,678 to 994 as more than 1.98 billion shares changed hands.

Meanwhile, the dollar was flat against the yen and the euro. Treasury securities edged lower.

Intel warning rocks tech sector

Another day brought more warnings about pending technology results. Unlike earlier this week, investors weren't willing to shrug off the bad news -- concerned about how technology stocks would hold up if the economy is slow to recover.

The negative reaction did not come as a great surprise.

"I think this is the normal response to a lack of evidence that the economy is also going to shine favorably in the tech sector," said Joe Battipaglia, chief investment strategist with Gruntal & Co. "We are in a trading range process of the worst negative expectations being played out in stock prices."

graphicIntel (INTC: Research, Estimates), both a Dow and Nasdaq component, tumbled $3.81 to $29.44. The world's biggest chipmaker warned again about weak sales and said it is cutting 5,000 jobs to rein in costs.

The job cuts, which represent about 6 percent of the company's work force, are expected over the next nine months and will be mainly through attrition, Intel said.

Fahnestock's Ackerman said investors should be wary about growth forecasts. "I think people need to be concerned about the length of the technology cycle and the inability of most CEOs and analysts to predict the course of corporate earnings over the next several quarters," he said.

Intel's news comes one day after National Semiconductor lowered its targets for the current quarter and fiscal year ending in May. Yahoo! warned earlier this week about first-quarter results, sparking a steep drop in its stock and speculation that the Web portal company could become a takeover target.

Shares of National Semiconductor (NSM: Research, Estimates) fell $1.93 to $23.32 while Yahoo!'s (YHOO: Research, Estimates) shares shed 69 cents to $17.

Other tech leaders also fell. Microsoft (MSFT: Research, Estimates) slid $2.56 to $56.69, Dell Computer (DELL: Research, Estimates) fell $2.75 to $23.38, and Sun Microsystems (SUNW: Research, Estimates) shed $2.88 to $17.44.

graphicIn other company news, Cisco Systems (CSCO: Research, Estimates) will be joining Intel in job cutting. The networking equipment maker said roughly 16 percent of its total work force, or about 8,000 jobs, will be cut in coming weeks due to the continued slowdown in orders. Shares of Cisco fell $2.06 to $20.75.

Job creation beats expectation

With the Federal Reserve's monetary policy-making meeting less than two weeks away, investors are zooming in on any economic data that might show what the Fed may do with interest rates.

"The real worry is that this report will limit the degree of Federal Reserve easing down the pike," William Sullivan, an economist with Morgan Stanley Dean Witter, told CNNfn's Street Sweep.

The latest key job data may prove harmful for investor sentiment. If job creation surges in a weakening economic environment, the Fed may not be as aggressive with cutting interest rates as investors had hoped.

"I think there were still some last shreds of hope that there would be a 75 basis point (three-quarter percentage point) cut on March 20 and that has virtually been quashed," said Seth Martin, equities analyst with IDEAglobal.com. "The Fed is really interested in being incremental and they're not interested in shocking the market."

Friday's data showed the U.S. economy created a surprisingly large number of jobs in February, while the unemployment rate held steady at 4.2 percent, according to the Labor Department. The world's largest economy created 135,000 jobs, surpassing Wall Street forecasts for an increase of about 75,000 jobs. The job growth eased from January's 224,000, which was revised down from the originally reported 268,000.

The skittish sentiment about the data hurt interest-rate sensitive financial stocks. J.P. Morgan (JPM: Research, Estimates) fell $1.29 to $48.95, American Express (AXP: Research, Estimates) shed $1.70 to $42.73 and Citigroup (C: Research, Estimates) slipped $1.62 to $49.13. graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.