Techs spook Wall St.
News from Intel, Cisco and Ciena unnerve U.S. investors as the Dow and the Nasdaq retreat.
February 21, 2002: 5:22 p.m. ET
By Staff Writer Alexandra Twin
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NEW YORK (CNN/Money) - Warnings from Ciena and BellSouth, combined with negative reports on Cisco and Intel, unnerved U.S. stock investors Thursday, pushing markets lower not just for the day but for the week.
The Nasdaq composite lost 59.33 on the day to close at 1,716.24; the index is down more than five percent on the week. The Dow Jones industrial average lost 106.49 to end the day at 9,834.68; the average is down less than a point on the week. The Standard & Poor's 500 gave back 17.03 to close at 1,080.95.
Those losses essentially erased gains made by a surprising late-day rally Wednesday.
"We're flirting with key technical support levels. Markets rally but then can't sustain. There's continued nervousness about accounting and corporate profits, but no catalyst to move us out of it," said Tim Heekin, head of stock trading at Thomas Weisel Partners.
Telecoms have been a "wet blanket" over the tech market of late, Heekin added. That was certainly the case Thursday.
Optical networking issue Ciena (CIEN: down $1.10 to $7.60, Research, Estimates) warned that its revenue in the current quarter would miss estimates. The optical networking gear maker also posted a fiscal first-quarter loss that was narrower than recently raised estimates.
No. 3 U.S. phone company BellSouth (BLS: down $2.50 to $37.95, Research, Estimates) cut its outlook for 2002 earnings, revenue, and capital spending, blaming weak demand and a late entry into the long-distance market.
Networking issues, chipmaker and Internet stocks added to the gloom.
Banc of America lowered second-quarter, third-quarter, and full-year earnings estimates on No. 1 chipmaker Intel (INTC: down $1.96 to $29.48, Research, Estimates), citing concerns about supply and sales forecasts.
The New York Post alleged that 12 Cisco (CSCO: down $1.58 to $15.11, Research, Estimates) officials failed to fully disclose their interests in a Silicon Valley partnership that may have benefited from its connections to the networking equipment company. The article followed up on allegations first made a week ago.
"We're near the top of a very tight and rigid trading range right now," Hugh Johnson, chief investment officer at First Albany told CNNfn. "Enron-itis has injected enough uncertainty that upwards moves cannot be sustained."
Asian stocks closed mostly higher Thursday, with Tokyo's Nikkei index rising 4.7 percent. European bourses closed higher on strength in automaker and telecommunication stocks.
Treasury prices were little changed, with the 10-year note yield down to 4.86 percent from 4.87 percent late Wednesday. The dollar was higher versus the yen, and nearly unchanged versus the euro. Light crude oil futures rose 62 cents to $21.05 a barrel in New York. Gold was modestly higher.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by almost 3-to-2 with 1.32 billion shares changing hands. The Nasdaq saw losers beat winners by almost 2-to-1 as 1.80 billion shares traded.
Networking shares take Ciena's cue
A range of networking, chip and telecom names chipped away at the Nasdaq. In addition to Intel, IBM (IBM: down $2.93 to $96.38, Research, Estimates) and Microsoft (MSFT: down $1.85 to $58.05, Research, Estimates) were among the tech names putting the most pressure on the Dow. Of the 30 components on the Dow, 25 closed lower.
Juniper Networks (JNPR: down $0.47 to $9.64, Research, Estimates) and JDS Uniphase (JDSU: down $0.55 to $5.26, Research, Estimates) suffered with other networking names on the Ciena news.
Among the manufacturing issues boosting the Dow was Boeing (BA: up $0.90 to $44.21, Research, Estimates), which announced it will cut 1,050 jobs, or 11 percent of those at two California satellite plants.
Alcoa (AA: up $0.87 to $37.48, Research, Estimates), Caterpillar (CAT: up $0.78 to $51.88, Research, Estimates), and DuPont (DD: up $0.33 to $46.66, Research, Estimates) also were among the Dow's biggest gainers.
Wireless communications provider Nextel Communications (NXTL: up $0.12 to $4.50, Research, Estimates) said its domestic operations loss was more than double that of a year earlier despite increased revenue, but declined to give full results until its subsidiary, NII Holdings, determines the size of its restructuring charge. The charge is expected to be between $1 billion and $2 billion.
CNN/Money parent AOL Time Warner (AOL: down $1.20 to $23.00, Research, Estimates) fell after more details were disclosed regarding news that mutual fund manager Janus Capital, the company's biggest outside shareholder, has sold about 25 percent of its holdings since March 2001 and one day after the stock was downgraded by Lehman Bros.
No. 3 U.S. consumer electronics retailer RadioShack (RSH: down $0.01 to $27.00, Research, Estimates) reported fourth-quarter income of 67 cents a share, a penny better than expected. The company also lowered its forecast for the first quarter.
J.C. Penney (JCP: down $2.80 to $20.79, Research, Estimates) warned it would miss forecasts for its current fiscal year. The retailer also reported fourth-quarter results that bettered expectations.
"You get the feeling people would like to follow through, but there's no conviction. We're in a range here. It's a mixed bag. We need to see a clear bottom before we can really move on," Joe Cangemi, trader at Francis P. Maglio & Co., told CNNfn's Market Call.
Trio of economic reports offer some hope
Earlier in the day, economic reports implying some positive momentum had given the Dow some strength.
In another sign of improvement in the manufacturing sector, the Philadelphia Federal Reserve's index of regional activity rose to 16.0 in February from 14.7 in January, surpassing expectations of economists, who were looking for a decline.
The Conference Board said its January Index of Leading Indicators rose 0.6 percent, in line with estimates, following a 1.2 percent rise in December. It was the fourth straight month the index has gained, a sign that the United States may be emerging from what some believe has been a nearly year-long recession.
"Below the current, the economy has been improving far more than the market reality would indicate," said Douglas Altabef, managing director at Matrix Asset Advisors. "And all things considered, the market is really behaving quite well today [Thursday]. But there's still tremendous anxiety; the market is held hostage to individual corporate news and accountability."
There were other positive economic numbers as well.
The nation's trade deficit was a narrower-than-expected $25.3 billion in December, decreasing from $28.6 billion in November. And the Labor Department said the number of new claims for unemployment benefits rose to 383,000 last week from 373,000 the previous week. While that was higher than what economists had expected, it was still below the 400,000 threshold that categorizes economic weakness. 
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