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Stock selling sharpens
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February 26, 1999: 1:48 p.m. ET
Downgrades, bearish comments feed tech fears, swamping broader market
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NEW YORK (CNNfn) - Technology stocks extended their fall from grace by early Friday afternoon, dragging the broader market with them as fears of slowing computer sales growth provoked increasingly bearish comments from Wall Street analysts.
Shortly before 1:30 p.m. ET, the technology-rich Nasdaq had fallen 38.69 points, 1.6 percent, to 2,288.13, led by wide selling in the computer makers and chip suppliers.
The losses drove the Dow Jones industrial average down 66.28 points to 9,300.06, while the broader S&P 500 index fell 11.39 to 1,233.63.
Declines beat advances 1,615 to 1,175 on the New York Stock Exchange. Trading volume was a robust 448 million shares. (Click here for a look at today's CNNfn market movers)
Bryan Piskorowski, Prudential Securities vice president and market analyst, noted that the technology sector had led the broader market back up from its autumn lows and, now that the techs were in retreat, they had dragged other stocks with them.
Blue chips found some a limited measure of confidence in the bond market, which reacted positively to news that the U.S. economy may be growing explosively but inflation has retreated to levels last seen in 1959. After the dramatic selling of recent sessions, the benchmark 30-year bond was up 1-11/32 points in price Friday, driving the yield down to 5.55 percent.
The dollar extended its retreat from the yen but gained slightly on the euro as neither bonds nor the strong economic data seemed able to encourage much greenback buying.
Technological difficulties
A rain of analyst downgrades kept the pressure on the beleaguered technology sector, feeding concerns that the days of blockbuster revenue growth may be waning for the once-proud tech bellwethers.
Brian Finnerty, head of Nasdaq trading at Unterberg Harris, said forecasts of weakening demand for computer products had hurt the long-term picture for tech stocks, although the sector should still show some strength into next month.
Meanwhile, the threat of a PC slowdown kept the downward pressure on computer makers a day after Merrill Lynch analyst Steve Milunovich predicted a downturn in the market would lead to tightening price pressures in the long term.
Compaq (CPQ) led the retreat, plunging 5-9/16, 13.5 percent, to 35-7/16 after both PaineWebber and Donaldson, Lufkin & Jenrette lowered their "buy" ratings on the stock to "neutral" and "market perform," respectively. Analysts from two other investment firms, including Merrill's Milunovich, cut their near-term earnings forecasts on Compaq.
Dell (DELL) fell 2-3/8 to 79-3/8 and Gateway (GTW) tumbled 6-3/4 to 73-3/8. Dow component Hewlett Packard (HWP) abandoned its recent show of contrarian strength, falling 4-5/16 to 66-7/8, while fellow blue chip IBM (IBM) lost 5-15/16 to 167-11/16. Sun Microsystems (SUNW) fell 5-1/16 to 97-5/8.
Chips also suffered deepening losses, plunging after Donaldson, Lufkin & Jenrette warned that slowing PC sales could spread to semiconductors, crippling the sector's fragile upward momentum.
Semiconductor giant Intel (INTC) fell 7-9/16 to 120-3/16 and rival AMD (AMD) slid 1/4 to 17-7/8 despite news that it had outpaced Intel for the first time in market share. Chip-equipment maker Applied Materials (AMAT) tumbled 6-3/8 to 57-3/8, while news of a $777 million takeover bid saved VLSI (VLSI), pushing shares up 4-5/8 to 15-3/8.
However, at least one voice crying in the wilderness, Mark Fitzgerald, Merrill Lynch semiconductor analyst, said the chip selling may be overdone. Fitzgerald noted that investors have yet to realize that these stocks can still benefit from overall unit growth and aren't prone to the same problems as the PC makers.
The selling spilled over into other technology bellwethers, undoing the weak rebound of late Thursday. Microsoft (MSFT) fell 3 to 150-1/2 and networking giant Cisco (CSCO) slid 1-3/8 to 97-1/8.
Bank stocks provided the broader market with support, as the rebounding bond market eased worries over the big bank's massive Treasury holdings. Instead, investors salivated over the banking-friendly prospect of higher interest rates ahead, driving Citigroup (C) up 1-13/16 to 58-13/16 and Bank One (ONE) up 1-7/16 to 53-5/8.
Internet provider America Online (AOL) benefited from persistent market rumors that the company could be targeted for a marriage of "near-equals" by AT&T (T). AOL shares climbed 1-1/16 to 88-1/4, but AT&T joined in the broader decline, sliding 1-1/4 to 85-1/16.
Merger speculation also gave truck maker Navistar (NAV) a lift, pushing shares up 3-3/8 to 42-13/16 after a firm "no comment" from Volvo failed to quash rumors of a transatlantic deal ahead. 
-- by staff writer Robert Scott Martin
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