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Wall St. gets pummeled
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February 17, 1999: 5:12 p.m. ET
Fear of slowing revenue growth drags tech stocks and broader market down
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NEW YORK (CNNfn) - U.S. stock markets suffered heavy losses Wednesday, weighed down by weakening technology shares after the latest earnings from the sector showed revenue growth may be running out of steam while stock valuations remain high.
The technology-heavy Nasdaq Composite bled 64.96 points, or 2.8 percent, to end the day at 2,248.91.
The Dow Jones industrial average lost 101.56 points, or 1.1 percent, to 9,195.47. Declines beat advances 1,976 to 1,051 as trading volume on the New York Stock Exchange reached 731 million shares.
The S&P 500 index fell 17.84 points, or 1.4 percent, to 1,224.03.
Strong but disappointing results from technology heavyweights Dell Computer and Hewlett Packard, reported late Tuesday, kept selling pressure on most of the big high-tech names and eventually dragged the broader market deep into the minus column.
"We're seeing a divergence in the equity markets and a divergence in the tech stocks," said Scott Jones, stock analyst at Jefferies & Co. "Dell is weighing on hardware stocks."
Still, Peter Canelo, U.S. equity strategist at Morgan Stanley Dean Witter, called the technology retreat a "good excuse to take profits" after a "fantastic rally" in the sector since October. (213K WAV) or (213K AIFF)
Bonds drew strength from the stock market's weakness. The benchmark 30-year Treasury bond recovered from an early-morning slump to rise 19/32 of a point in price for a yield of 5.30 percent.
The dollar eased against the euro but remained strong against the Japanese yen, following its soaring gains Tuesday, still climbing toward the 119-yen barrier.
Dell keeps techs depressed
The technology sell-off that began Tuesday night in the shares of Dell Computer (DELL) entered its second day 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 7-3/16 to 81-9/16, making it by far the most active issue on the Nasdaq. At 112 million shares traded, Dell also became the third most heavily traded stock in the history of the Nasdaq, falling behind record-holder Oracle and second-place, now delisted, Comparator. Dell had fallen as low as 75-1/2 in after-hours trading Tuesday.
The company also announced a 2-for-1 stock split, its seventh in as many years.
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 2-1/4 to 68-1/4.
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 rallied for much of the trading session, before easing at the end of the day, to close 1/4 lower at 67-5/8.
Other big-name techs also finished lower. Dow member IBM (IBM) fell 2-1/8 to 170-3/8, Microsoft (MSFT) lost 6-1/4 to 150 and Cisco Systems (CSCO) shed 3-15/16 to 95-1/8. Sun Microsystems (SUNW) fell 6-3/8 to 94-1/16.
Dell competitor Gateway (GTW) finished 1 lower at 67 and rival Compaq (CPQ) ended down 1-15/16 to 40-7/8. Intel (INTC) eased 1-3/4 to 124-5/8. The stock had risen earlier in the day 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 to 75 after the company said sales at its newly acquired Arterial Vascular Engineering unit fell below expectations in the fiscal third quarter.
(Click here for a look at today's CNNfn market movers.)
(Click here for a look at today's CNNfn technology stocks report.)
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