U.S. stocks head south
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February 17, 1999: 10:15 a.m. ET
Perceived sales troubles at Dell sink techs, broader market follows suit
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NEW YORK (CNNfn) - U.S. stocks fell in early trading Wednesday, punished by selling in the technology sector caused by what investors saw as a discrepancy between high stock valuations and earnings growth among some of the sector leaders.
Strong, but disappointing results from industry heavyweights Dell Computer and Hewlett Packard, reported late Tuesday, helped plunge the rest of the high-tech sector and the broader market into the red.
Shortly before 10 a.m. ET, the technology-laden Nasdaq Composite was down 22.56 points at 2,291.31.
Losses were more limited for the Dow Jones industrial average, which traded 56.51 points lower at 9,240.52. The S&P 500 index fell 7.44 to 1,234.43.
Bonds recovered from an early-morning slump caused by profit taking after Tuesday's strong gains. The market bounced back, helped by the declines in stocks and data showing industrial production remained virtually unchanged in January. The benchmark 30-year Treasury bond rose 4/32 of a point in price for a yield of 5.33 percent.
The dollar remained strong against the Japanese yen, following its soaring gains Tuesday. The greenback eased against the euro.
Dell unsettles the techs
In stocks, what started Tuesday night with an after-hours meltdown in the shares of Dell Computer (DELL) continued in the morning as investors showed their disappointment with the company's slowing fourth-quarter revenue growth.
Although Dell reported earnings in line with expectations, and its revenue jumped 38 percent from the same quarter a year earlier, the sales numbers came sharply below expectations and 38 percent was well below the 52 percent revenue growth the company averaged in the previous three quarters.
Taking the news as a signal that the company's days of rocket-speed growth may be coming to an end, investors brought Dell's stock down 8-3/16, or more than 9 percent, to 80-9/16, making it the most active Nasdaq issue. Dell had fallen as low as 75-1/2 in after-hours trading Tuesday.
Fellow high-tech blue chip Hewlett Packard (HWP), which Tuesday reported earnings that beat expectations, but meager revenue growth in the fiscal first quarter, also saw its stock skid. The Dow component lost 9/16 to 69-15/16.
Investors were far more generous with the stock of chip-equipment maker Applied Materials (AMAT), the third major high-tech to deliver its latest results Tuesday night. Although the company's operating profit of 11 cents a share was sharply below the 52 cents a share earned in the same quarter a year earlier, it was almost double the 6 cents Wall Street expected. As a result, Applied Materials' shares shot 2-11/16 higher to 70-9/16.
Other big-name techs were mostly lower. Dow member IBM (IBM) fell 1-1/4 to 171-1/4, Microsoft (MSFT) lost 3-1/2 to 152-3/4, and Cisco Systems (CSCO) shed 15/16 to 98-1/8. Dell competitor Gateway (GTW) inched up 1/8 to 68-1/8 but rival Compaq (CPQ) was down 1 to 41-13/16. Intel (INTC) inched up 23/32 to 127-3/32 as Applied Materials' surprisingly strong earnings led some investors to believe the semiconductor industry could be on the way to a steady recovery.
In the day's other news, shares of medical-equipment maker Medtronic (MDT) tumbled 6-1/8 to 74-7/8 after the company said sales at its newly-acquired Arterial Vascular Engineering unit fell below expectations in the fiscal third quarter.
-- by staff writer Malina Poshtova Zang
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