|
A bloodbath in techland
|
 |
January 4, 2000: 5:23 p.m. ET
Technology issues bear the brunt of broad market sell-off
|
NEW YORK (CNNfn) - Technology stocks took some of the hardest knocks in Tuesday’s market skid, which observers chalked up to postponed profit-taking and a delayed reaction to looming interest-rate hikes.
High-flying technology stocks were largely responsible for sending the Nasdaq Composite index up an astonishing 85.6 percent in 1999, the largest annual gain for a major market index in U.S. history.
The run-up on the Nasdaq accelerated in the last months of 1999, and continued virtually unabated until the very last trading session, as a growing number of market observers sat shaking their heads, befuddled by the sector’s skyrocketing valuation in the face of what many see as inevitable interest-rate increases by the Federal Reserve.
As investors now move to cash in on the gains they made in the technology sector in 1999, they are adding to the typical volatility that stocks on the Nasdaq experience in January, noted Andrew Barrett, technology analyst at Salomon Smith Barney.
"Throw in the specter of higher interest rates and you have a situation that is not exactly conducive to the upside of tech,” Barrett told CNNfn.
Marc Klee, manager of John Hancock’s Global Technology Fund agreed, but he said other seasonal factors could help balance out the negative affects moving ahead.
"On the one hand, people have huge gains, and they waited until after Jan. 1 to postpone the gain for a year,” Klee said. That's a negative factor. But the other side is, seasonally, January is the strongest month of the year. The cash flows come in. Where does the cash tend to go? It tends to go to the areas that have been working. So mutual funds like ours are seeing strong positive cash flow. That tends to help the technology stocks. I'm not sure which end of the balancing act wins out.”
But Tuesday’s sell-off weighed heavily on the Nasdaq, which declined 5.57 percent on the day, finishing 229.92 lower at 3,901.23, its largest ever one-day point decline.
Earnings warnings add to the weight
Computer Network Technology (CMNT), which makes hardware and software products for computer networks, continued to decline, after the company warned on Monday that it would fall well short of its fiscal fourth-quarter sales and earnings targets. CNT shares slid another 5/16 to end Tuesday’s session 1.8 percent lower at 17-7/16.
Shares of engineering software maker Parametric Technology (PMTC), also fell on a negative earnings outlook released after Monday’s close. The company said earnings for its first fiscal quarter would be 4 cents to 6 cents per share, compared with Wall Street’s estimate of 15 cents. Parametric ended Tuesday’s session 5-1/8 lower at 20, a 20.4 percent decline on the day.
Some stocks find shelter
Asyst Technologies (ASYT), which makes products used in semiconductor manufacturing "clean rooms,” escaped the carnage Tuesday. Shares of Asyst surged 17.5 percent higher, ending up 12 at 80-3/4 after the company late Monday said its fiscal third-quarter profits would beat Wall Street’s expectations and announced plans for a 2-for-1 stock split.
Shares of software maker Intuit (INTU) also managed to tread water, ending up 5/8 at 60-7/8. Bear Stearns initiated coverage of the stock on Tuesday with a "buy” rating.
Dot-coms on the decline
Internet stocks, which rallied strongly in Monday’s session, didn’t fare quite as well on Tuesday. The Dow Jones composite Internet index slid 6.8 percent, ending the session 29.72 lower at 404.47.
After a morning rally on news that Schroder and Co. had raised its rating on the stock, shares of Web portal Yahoo! (YHOO) plummeted in the last hour of trading, ending the session 32 points lower at 443, a 6.7 percent decline on the day.
Online retailer Amazon.com (AMZN) slipped 8.3 percent to end the day 7-7/16 lower at 81-15/16. Shares of America Online (AOL) ended the session 7.2 percent lower, losing 6 to close at 77.
Shares of online auctioneer eBay (EBAY) slid 9.3 percent, closing 13-1/4 lower at 128.
Business-to-business Internet company FreeMarkets (FMKT) slipped more than 18.5 percent, ending the session 63-3/8 lower at 278-1/2 after the company said it would no longer provide online auction services for General Motors's (GM) industrial parts.
Big Board tech issues hit the skids
Tech stocks that are listed on the New York Stock Exchange, which managed to sidestep a steep decline among blue chips Monday, were unable to escape Tuesday’s broad sell-off.
IBM (IBM) slipped 4 to finish 3.45 percent lower at 112. Hewlett-Packard (HWP) slid 7.6 percent, finishing the session 8-15/16 lower at 108-1/2. Motorola (MOT) shares lost 7.2 percent, closing 10-13/16 lower at 138-3/16.
Shares of Compaq Computer (CPQ) finished the session down 2 at 29, a 6.5 percent decline on the day. After the closing bell, the computer maker announced it would buy distribution facilities and other assets from Inacom (ICO), which the company said are key to its direct-sales strategy. Inacom shares ended the session 1-7/8 higher at 9-1/2, a 24.6 percent rise on the day.
The beginning of a market correction?
While market observers are still somewhat optimistic about the potential for technology stocks moving deeper into 2000, many are saying that the party may be over, at least for the near term.
Craig Ellis, manager of Orbitex Management’s Infotech and Communications Fund, said that while he expects a strong fourth-quarter earnings season to send the market back up, there are likely to be further rounds of selling.
"I kind of doubt that we’re done with it right here,” he said.
Hugh Johnson, First Albany’s chief investment officer said he was not at all surprised by the direction tech stocks took on Tuesday, considering the sector’s extremely high valuation.
Looking ahead, Johnson said he expects some of the highly valued tech stocks - such as Oracle (ORCL) and Sun Microsystems (SUNW) - to start giving back some of their huge gains, pulling the rest of the market down with them.
"It’s not unusual in these kinds of markets when you have those kinds of gains to give half of it back shortly thereafter,” Johnson said. "We’ve only given part of it back, so hang onto your seats. I think there’s more to go on the downside.” 
|
|
|
|
|
 |
|
