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Tech plunge continues
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October 18, 1999: 4:38 p.m. ET
Inflation, earnings fears turn investors away from the sector
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NEW YORK (CNNfn) - Technology stocks continued their downward spiral in Monday trading amid inflation and interest-rate fears.
The Nasdaq composite index plunged 43 to close at 2688.83, according to preliminary results. The Nasdaq had dropped as low as 2632.01 before a late rally erased some losses. Monday's descent follows Friday's 75-point free-fall.
Among blue-chip technology firms, Dell Computer Corp. (DELL) dropped 1-1/2 to 41-5/16, Intel Corp. (INTC) finished 1-1/2 lower at 69-3/8 and Oracle Corp. (ORCL) gave up 1-1/8 to 43-7/8.
"The Nasdaq has largely been immune to the pullback in the Dow recently," said Art Russell, technology analyst at Edward Jones. "Some of this response is overdue."
Russell pointed out that investors have been antsy over inflation fears and the threat of a subsequent interest-rate hike, particularly in light of Friday's higher-than-expected Producer Price Index report.
He added that if Tuesday's Consumer Price Index report spells more bad news, tech stocks could be headed for more heavy losses.
"From a purely technical standpoint, we could see the Nasdaq falling to 2,500 levels in the near term," Russell said.
Earnings results have also put pressure on technology stocks. Although analysts say most technology-related earnings have been strong, disappointing results from Intel and Lexmark International Group 's (LXK) fourth-quarter warning have some investors spooked.
"People are getting nervous about these stocks," Russell said. "There's a lot of room for a continued downside. The next couple of days could be a good time for long-term investing for bargain hunters."
Lexmark shares plummeted 28, or 30 percent, to 65.
Internet stocks take another hit
While Monday's technology sell-off was broad-based, Internet shares in particular fell under heavy pressure.
Among Internet issues, CMGI (CMGI) tumbled 3-1/2 to 94-5/16, Network Solutions Inc. (NSOL) lost 6-9/16 to 85-9/16 and Lycos Inc. (LCOS) dropped 3-7/8 to 52.
Although tech stocks have taken a beating in the last few sessions, some analysts remain confident that the group will make a strong recovery.
"Right now, technology represents about 24 percent of the capitalization of the S&P," said Phil Dow, equity strategist at Dain Rauscher Wessels. "My guess is we're headed up to maybe the 20s or maybe 30 percent. If you look back historically, leading groups can capture that much of the market and I think technology's driving the market right now."
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