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Markets & Stocks
IBM leads Dow under 10,000
October 18, 2000: 4:38 p.m. ET

Big Blue's revenue miss sparks sell-off; tech sellers outpace buyers on Nasdaq
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - The Dow Jones industrial average tumbled to its lowest level in seven months, closing below 10,000 Wednesday even after recovering some of its 433-point loss, amid concerns about revenue growth led by IBM, which missed its target.

"You had a tremendous amount of fear on the opening," said Barry Hyman, chief investment strategist at Weatherly Securities. "There's so much negative pessimism out there and the fear gets thicker by the hour. Nothing has changed, though. The market was skewed by IBM today, but the market is bigger than any one individual stock and you still have to pick and choose your sectors."

graphicThe Dow ended down 114.69 at 9,975.02, after briefly snapping back above 10,000. The blue chip index is down 13 percent from the start of the year and off 6.3 percent this month. It is the first time the Dow closed below 10,000 since March 14, when it closed at 9,811.24.

Analysts said the sell-off does not necessarily mean the bottom has been reached, and cautioned investors to tread lightly.

"It's a very unusual day for the Dow Jones because IBM and J.P. Morgan accounted for more than half the drop. We've got a lot of fear in the market place and that's going to continue," Alan Skrainka, chief market strategist at Edward Jones, told CNNfn's market coverage. "We don't know where the bottom is, so just stay the course. There's so much uncertainty and investors have so many questions that they just sell stocks."

Tech sellers hurt the Nasdaq composite index, which bounced between positive and negative territory throughout the session, with modest support from select tech issues, such as WorldCom and Yahoo!. But worries about revenue growth in the tech sector pressured the index lower.

graphicThe Nasdaq shed 42.56 to 3,171.40, unable to fully recover from a 6 percent decline. The index is down 22 percent year-to-date and 13.6 percent this month. The S&P 500 shed 7.86 to 1,342.11.

Market breadth was negative on active volume. On the New York Stock Exchange, decliners topped advancers 1,905 to 988, as more than 1.4 billion shares changed hands. Losers beat winners 2,574 to 1,446, on the Nasdaq as more than 2.4 billion shares were traded.

Treasury securities rose. The dollar edged higher against the euro but weakened versus the yen.

IBM leads Dow down


Investors trying to find a market bottom are struggling as the markets plunge on rising concerns about revenue growth for the darlings of the tech world.

"Goldilocks is dead and the Three Bears are in the process of consuming her," said Bill Meehan, chief market analyst at Cantor Fitzgerald. This was clearly shown by the heavy selling taking place Wednesday.

IBM (IBM: Research, Estimates) plunged $17.50 to $95.50, its lowest point since March, after reporting third-quarter net income in line with estimates but falling short of revenue expectations. The computer maker earned $1.08 a share during the quarter, compared with 93 cents a year earlier.

"You'll probably see some bottom-fishing in IBM soon, but the rallies are going to be very narrow, selective and not sustainable," said Larry Rice, chief strategist at Josephthal & Co.

J.P. Morgan (JPM: Research, Estimates) fell $3.13 to $134.50 after reporting that third-quarter earnings excluding one-time items fell to 68 cents a share from 92 cents a share a year earlier. Wall Street analysts had forecast profit of 93 cents a share.

J.P. Morgan's tumble came on the heels of a 24 percent drop in earnings by Chase Manhattan (CMB: Research, Estimates), which is acquiring J.P. Morgan for $33 billion in stock. Chase Manhattan shares fell $1.06 to $36.88.




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"There is not enough earnings and/or revenue growth to justify valuations in a lot of the technology stocks and there is a great amount of fear that analysts will be slashing away at their earnings estimates for next year," Meehan said.

Texas Instruments (TXN: Research, Estimates) fell $3.44 to $36.88 after Lehman Brothers cut its rating to "neutral" from "outperform," saying it thought revenue growth would be flat from the third quarter to the fourth. The semiconductor company is expected to report 33 cents a share earnings, versus 22 cents a share a year earlier.

"It has turned itself into a more rational market -- earnings are important and top line growth is important," said Weatherly's Hyman. "Stocks have to prove themselves and many of them are not passing muster. There's no need to be a hero and step in front of earnings."




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There were some bright spots in technology as Intel (INTC: Research, Estimates) rose $2 to $38.19. The world's largest supplier of PC microprocessors turned in a third-quarter profit of 41 cents per share late Tuesday, exceeding analysts' recently reduced forecasts following a warning from the semiconductor maker late last month.

"Any rally we're going to see is not going to be a very powerful rally. It's going to be a handful of what investors perceive as safe trading stocks or big name capitalization," Josephthal's Rice said.

graphicAlso in technology, Sun Microsystems (SUNW: Research, Estimates) fell $1.19 to $110.19, after it reported a fiscal first-quarter profit that beat Wall Street's expectations on sales that rose 60 percent from the year-earlier period.

Stocks tempering the Nasdaq's loss included WorldCom (WCOM: Research, Estimates), which rose $2.13 to $23.94, Dell Computer (DELL: Research, Estimates), up $1.88 to $26.25, and Yahoo! (YHOO: Research, Estimates), advancing $3.81 to close at $52.74.

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Among the major technology names reporting after the bell Wednesday is another Dow component, software maker Microsoft (MSFT: Research, Estimates, which is expected to have earned 41 cents a share in its fiscal first quarter compared with 38 cents a share a year earlier.

Microsoft advanced $1.31 to $51.75.

And analysts expect Apple Computer (AAPL: Research, Estimates), which has seen disappointing sales of its sleek cube PCs, to post fiscal fourth-quarter earnings of 45 cents a share compared with 50 cents a share in the year-earlier quarter.

Apple finished unchanged at $20.13.

Brian Finnerty, head of Nasdaq trading at C.E. Unterberg Towbin, told CNNfn's market coverage that the worst of the markets' drubbing is over -- probably. (481K WAV) (481K AIFF)

CPI, housing starts rise


In the day's closely watched economic data, consumer prices rose 0.5 percent in the United States last month, the government said Wednesday, while the "core" consumer price index, excluding food and energy costs, rose 0.3 percent -- readings that both came in a shade above Wall Street forecasts.

"We no longer and we haven't had a declining rate of inflation," Cantor Fitzgerald's Meehan said. "Why anybody would think the Fed would be considering easing now is hard to believe."

Separately, housing starts edged up 0.3 percent to an annual rate of about 1.53 million last month, just shy of economists' estimates.

December graphicNovember crude on the New York Mercantile Exchange (NYMEX) gained 13 cents to $32.55 a barrel, as the American Petroleum Institute (API) said crude inventories fell 3.1 million barrels in the week ended Oct. 17, sliding back toward 24-year lows just as the nation heads into its peak winter-demand season.  Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.