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Markets & Stocks
Wall St. gets hammered
April 3, 2001: 4:33 p.m. ET

Fear about profit growth sends Dow, Nasdaq plunging to triple-digit losses
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. stocks got slammed Tuesday after a slew of earnings warnings brought fears to the forefront about how companies will perform in a slowing economy.

Another day, another 29-month low on the Nasdaq composite index, which shed more than 100 points. It has become an almost daily occurrence for the indicator to exceed its previous decline.

Meanwhile, the Dow Jones industrial average plunged nearly 300 points. All 30 issues on the Dow took a beating, with most falling more than $1.

"People don't want to lose any more money, and selling begets selling," said Peter Green, market analyst with Gerard Klauer Mattison & Co. "No one is giving any good guidance and it's a complete selling fest."

graphicTechnology stocks were dragged lower by software maker Ariba, which said it would post a loss instead of a profit for its fiscal second quarter.

The Nasdaq composite index fell 109.97, or more than 6 percent, to 1,673.00. The indicator is now at levels it hasn't seen in more than 29 months, and has lost two-thirds of its value from its March 10, 2000, high of 5,048.62.

But the selling wasn't confined to tech issues, as worries about growth spilled into the broader market. Just two weeks ago, the Dow briefly stepped into bear market territory defined as a 20 percent drop from a high.

"Whenever companies come out with warnings, it reminds investors about the perilous nature of the earnings environment at the moment," said Joseph Battipaglia, chief investment strategist at Gruntal & Co.

graphicThe Dow Jones industrial average dropped 292.22, or around 3 percent, to 9,485.71. The blue chip indicator is down 19 percent from its Jan. 14, 2000 high of 11,722. The Standard & Poor's 500 shed 39.41 to 1,106.46 and is down 27 percent from its March 23, 2000 high of 1,527.

It wasn't just the warnings plaguing sentiment. With the income tax deadline just 13 days away, some investors also may be feeling the pain of having to ante up money for tax liabilities suffered in the face of last year's significant equity losses.

"People lost money last year and now they have to pay the tax bill -- 'They're saying I lost money and now I have to write a check.' They're not thinking about earnings or warnings," said Vince Farrell, chief investment officer with Spears Benzak Salomon & Farrell.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers 2,362 to 735 as more than 1.36 billion shares were traded. Losers outpaced winners on the Nasdaq 3,012 to 785 as more than 2.55 billion shares changed hands.

In other markets, Treasury securities edged higher. The dollar slipped against the euro and yen.

Are we near the bottom?

Signs of continued weakness in the day's economic data didn't help the negativity plaguing the markets. The government's report on factory orders pointed to further slowing in the manufacturing sector.

"It's starting to feed on itself, which is the anxiety which marks the bottom," Farrell said.

Still, analysts said much of the bad news has been priced into the market and investors shouldn't throw in the towel -- it was still expected that there would be selling as more warnings come to light.

"The bad news is stuff that we know about -- it's Corporate America, especially on the technology front, letting us know they're not going to make their numbers and we knew that was going to happen," said Art Hogan, chief market analyst with Jefferies & Co.

The selling comes one day after the tech-heavy Nasdaq dropped to a 29-month low and the Dow didn't fare much better. Analysts said the recent action signals a shift from rotational moves to money being taken out of the markets.

"The quarter is starting off pretty rough," Brett Gallagher, head of U.S. equities with Julius Baer, told CNNfn's Market Call. "We're heading into earnings season and I don't think anyone is expecting anything good."

But analysts say this is mildly encouraging because it sets the stage for a near-term bottoming out that could bring some money back in off the sidelines.

Bracing for the warnings

Market participants have been bracing for the worst. The influx of warnings from companies in all sectors has met those expectations and fueled the selloff.

Ariba (ARBA: Research, Estimates), a maker of software allowing companies to buy and sell online, warned late Monday that it will post a fiscal second-quarter loss instead of the earnings that were expected. The company also said it will cut a third of its work force and terminate its proposed merger with Agile Software (AGIL: Research, Estimates).

Shares of Ariba fell $2.06 to $4.44 while shares of Agile slid 19 cents to $10.31.

  graphic CORPORATE WARNINGS  
    Click below for a comprehensive list of companies issuing warnings
  • Earnings Warnings
  •    
    BroadVision (BVSN: Research, Estimates) fell $1.53 to $2.97 after the e-commerce software maker said its first-quarter revenue will miss Wall Street expectations and post a loss, compared with the small profit analysts expected. It also said it plans to cut about 325 jobs, 15 percent of its work force.

    Other technology stocks also stumbled. IBM (IBM: Research, Estimates) shed $4.27 to $90.39, Microsoft (MSFT: Research, Estimates) slid $2.44 to $53.38 and Oracle (ORCL: Research, Estimates) fell $2.07 to $13.25.

    Xerox (XRX: Research, Estimates) slipped $1.05 to $4.95 after the copier maker said it had delayed the filing of its 2000 annual report because its auditing firm advised that a more thorough review is necessary.

    graphicThe semiconductor sector, often viewed as indicative of where the broader techs are headed, struggled. The Philadelphia semiconductor index, or Soxx, slid 12.58, or more than 2 percent, to 490.59.

    "We really have priced in a lot of bad news," said Jefferies' Hogan. "Even if we continue to see a string of (negative) pre-reports, at some point in time, we're going to start to trend higher."

    In the chip sector, Applied Materials (AMAT: Research, Estimates) gained 13 cents to $40.13, while Altera (ALTR: Research, Estimates) slid $1 to $19.69.

    Singin' the blues

    Concern that earnings warnings would not be confined to techs weighed on industrial issues on the Dow.

    Caterpillar (CAT: Research, Estimates) fell $2.28 to $42.16, 3M (MMM: Research, Estimates) shed $2.14 to $99.91, and Honeywell (HON: Research, Estimates) tumbled $2.23 to $38.25.

    Positive earnings surprises were rewarded. Best Buy (BBY: Research, Estimates) jumped $3.20 to $40 after the electronics retailer said it earned 89 cents a share in its fiscal fourth quarter, better than Wall Street expectations.

    graphicInvestors seeking some ray of sunshine could take some comfort from Salomon Smith Barney, which upped its equity weighting to 70 percent from 65 percent Tuesday.

    In a research report, Salomon analyst Tobias Levkovich wrote that much of the "tech wreck" seems to be in the past, but that anything more than a near-term rally in the sector is unlikely.

    Factory orders edge lower

    Although it is not considered a major economic indicator in terms of what the Federal Reserve may do with its interest rate policy, the Commerce Department's reading of factory orders fell 0.4 percent in February, the latest sign that demand for manufactured goods is slowing.

    Economists surveyed by Briefing.com expected an increase of 0.2 percent, compared with a revised 4.3 percent decline in January.

    In global affairs, UBS Warburg director of floor trading Arthur Cashin told CNNfn's the Money Gang that there was talk on the floor about how President Bush would deal with the situation in China.

    But other market participants dismissed its impact on the markets, pointing out that U.S. diplomats have now been allowed to visit the crew of the Navy spy plane that survived a midair collision with a Chinese fighter plane.

    "In the end, it's not going to have much of an effect," said Gruntal's Battipaglia. "I don't see this as anything more than transitory." graphic





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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.