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Dow hit by financials
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May 25, 2000: 6:41 p.m. ET
A profit downgrade for Goldman Sachs sparks a late stock market sell-off
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Dow Jones industrial average tumbled more than 200 points Thursday, hit by a plunge in financial stocks and by concerns over Microsoft, which fell to its lowest level in a year.
Higher for most of the session, the Nasdaq composite index also lost value by day's end, as investors in the last minutes of trading bailed out of Intel, Cisco Systems and Sun Microsystems.
The losses disappointed analysts hoping the two major indexes would eke out two straight higher closes for the first time in a week.
"I think the culprit is financials," said Ted Weisberg of Seaport Securities, told CNN's Street Sweep. "They completely rolled over and all that good work went down the drain."
Dow financials J.P. Morgan and Citigroup tumbled after Merrill Lynch slashed its earnings estimates for Goldman Sachs. The index of 30-blue chip stocks fell 211.43 points, or 2 percent, to 10,323.92.
 Microsoft dragged heavily on the Dow after a federal judge signaled that the government's proposal to break up the company may not go far enough.
The Nasdaq, meanwhile, fell 65.26, or 2 percent, to 3,205.35, dropping for the sixth time in seven sessions.
The S&P 500 dipped 17.53 to 1,381.52.
More stocks fell than rose. Declining issues on the New York Stock Exchanged topped advancing ones 1,610 to 1,269 as volume hit 975 million shares. Nasdaq losers beat winners 2,268 to 1,734. More than 1.5 billion shares changed hands.
In other markets, the dollar fell against the euro and yen. Treasury securities rose.
Financials tumble
Goldman Sachs (GS: Research, Estimates) fell 7, or 9 percent, to 73.
 The plunge followed a note from Merrill Lynch analyst Judah Kraushaar that said Goldman is uncomfortable with Wall Street earnings estimates of $1.47 per share for the March-though-May quarter.
Merrill slashed its profit projections for Goldman to between $1.30 and $1.35 per share for the current quarter.
Revenue has weakened, Merrill said, while light trading volume could hurt earnings. A spokeswoman for Goldman Sachs declined to comment.
Other financial stocks suffered. J.P. Morgan (JPM: Research, Estimates) lost 3-5/8 to 129 and Citigroup (C: Research, Estimates) tumbled 2-13/16 to 58-9/16.
Noting that the brokerage stocks have performed well in the recent market downturns, Richard McCabe, chief market analyst at Merrill Lynch, said these stocks may simply be the last ones to crack ahead of a summer rally.
"I think it's all part of the bottoming out process that the market average have been going through since mid-April," McCabe told CNN's Street Sweep.
Reaching a bottom of sorts, Microsoft (MSFT: Research, Estimates) fell 4-1/16 to 61-1/2, a 52-week low.
 The losses came after the judge in the antitrust case against Microsoft asked the government to restructure its proposal that Microsoft be split into two companies. Judge Thomas Penfield Jackson's actions suggested that the government plan did not go far enough and questioned whether the company in fact should be split into three parts.
In a note to clients, Goldman Sachs analyst Rick Sherlund called the judge's actions a "stunning defeat" for the company.
Microsoft's losses also hurt the Nasdaq, which for most of the day looked set to close higher for the second straight session, as investors moved into technology stocks cheapened by a week-long sell-off.
But bargain hunting will have to wait. Intel (INTC: Research, Estimates) shed 2-3/16 to 115-3/16, Cisco (CSCO: Research, Estimates) fell 1/2 to 54-5/8 and Sun Microsystems (SUNW: Research, Estimates) lost 3-1/2 to 72-7/8.
Still, one analyst said the worst may be over.
"My gut feeling is the Nasdaq has made its low," Marc Klee, technology fund manager at John Hancock, told CNN's Street Sweep. (303K WAV) (303K AIFF)
 At the same time, investors grappling with the prospects of normal trade with China mostly punished company with links to China. The U.S. House of Representatives voted Wednesday to give the world's most populous country trading privileges with the United States.
But China.com (CHINA: Research, Estimates), a pan-Asian Internet company, fell 2-1/2 to 24-1/2
And big exporters failed to draw the buyers some analysts expected. Boeing (BA: Research, Estimates) fell 1/2 to 38-3/8 and Caterpillar (CAT: Research, Estimates) shed 1-5/8 to 38-1/16.
Krispy Kreme (KREM: Research, Estimates), meanwhile, jumped 3-7/16 to 50-1/4. The doughnut retailer earned 27 cents per share in its first quarter as a public company, beating Wall Street expectations of 23 cents. (Click here for a look at other companies reporting earnings Thursday.)
GDP powers ahead
In economic indicators, the nation's gross domestic product, the broadest measure of goods and services produced, advanced at a 5.4 percent pace in the first quarter, the Commerce Department said. The government's second reading on GDP came in identical to its first reading issued last month.
The data, almost two months old, had no apparent market effect. Economists will pay more attention to jobs data and home and retail sales figures for May, to be issued over the next few weeks, to see if the Federal Reserve's most recent interest rate hike is slowing growth.
Separately, sales of existing homes fell 6.2 percent to an annual rate of 4.88 million last month, the National Association of Realtors said. Wall Street had expected a modest decline. Analysts have been keeping a keen eye on the housing market for signs of an economic slowdown. The report could be the first indication that interest rate hikes may taking effect.
Late Thursday Fed Chairman Alan Greenspan addressed via satellite a banking group in San Francisco. In his first speaking engagement since the central bank's decision last week to raise interest rates, the Fed chief warned that the strong U.S. economy will not shield banks from risks inherent in their business. 
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