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Markets & Stocks
Steady selloff on Wall St.
April 6, 2001: 4:39 p.m. ET

Investors cash in amid worries about jobs data and more earnings warnings
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - Wall Street capped a volatile week with a steady selloff Friday, after a weaker-than-expected March employment report and a host of earnings warnings renewed uncertainty about the pace of corporate growth in a slowing economy.

The data were just the latest catalyst in what has become an almost daily reaction to the influx of bad news.

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The Nasdaq composite index fell 64.71, or more than 3 percent, to 1,720.29. The indicator is down 30 percent from the start of the year and has fallen nearly 66 percent from its high, reached on March 10, 2000, of 5,048. For the week, the Nasdaq is down 6.9 percent.

And the Dow Jones industrial average slipped 126.96, or more than 1 percent, to 9,791.09. The blue chip index is down 9.2 percent from the start of the year and down 16 percent from its Jan. 14, 2000 high of 11,722. For the week, the Dow is down 0.8 percent.

The Standard & Poor's 500 shed 23.04 to 1,128.42 and is down 14 percent from the start of the year and down 26 percent from its March 14, 2000 high of 1,527. For the week, the S&P is down 2.7 percent.

The selloff came after a day that sent the major indexes surging out of the starting gate. But the direction is still down.

"To me it seems like the Street was treating the market like a casino game – when those employment numbers came out, we got two cherries and one lemon," said Charles Payne, head analyst with Wall Street Strategies.

Friday's market was further clouded by warnings from Agilent Technologies, Sycamore Networks and Tellabs, among others.

graphic"This market just won't give up some old habits," said Peter Cardillo, director of research with Westfalia Investments.

The bottoming-out process continues as traders cashed in on Thursday's gains while investors remained skittish about the economy and a slowdown in earnings growth.

"It looks like bad news is bad news and we have the grim reality of a slowing economy," said Bryan Piskorowski, market analyst with Prudential Securities.

Market breadth was negative. On the Nasdaq losers beat winners 2,412 to 1,222 as more than 1.82 billion shares were traded. Decliners outpaced advancers 2,131 to 879 on the New York Stock Exchange as more than 1.25 billion shares changed hands.

In other markets, Treasury securities edged higher. The dollar edged lower against the euro but was little changed versus the yen.

Economic data unnerves investors

The U.S. unemployment rate rose to its highest level in 20 months in March as job growth stalled, according to the Labor Department.

In the latest sign that the U.S. economy still is slowing, businesses cut 86,000 jobs outside the farm sector last month after adding a revised 140,000 jobs in February, according to the report.

The unemployment rate edged up to 4.3 percent -- the highest level since July 1999 -- from 4.2 percent in February. The reduction in payrolls was the largest since the end of 1991.

The data came one day after a report that the number of new jobless claims in the United States rose to its highest level since July 1998, according to the Labor Department, with the figure topping economists' forecasts.

"The economy still remains bleak and is getting bleaker," said Michael Holland, chairman of Holland & Co. "The Federal Reserve remains behind the curve -- this will end, but not in the near future."

The Fed has tried to breathe some life into the economy by cutting interest rates by 1-1/2 percentage points since the start of this year. But analysts said it's not enough.

"We've got 150 basis points under our belts and nothing is done yet in terms of seeing a potential lift in the economic sails," Prudential's Piskorowski said. "They're (the Fed) going to be forced to address the fact we're seeing rising unemployment."

While the recent reports came in weaker than expected, Merrill Lynch chief economist Bruce Steinberg does not think the economy is in such bad shape -- but does think the Fed needs to act more aggressively.

In a note to clients, he wrote, "We would not change our forecast to a recession based on this report. We believe this report will pressure the Fed to move and increases the likelihood the Fed will ease next week."

But Dallas Federal Reserve President Robert McTeer said Friday he expects U.S. productivity growth to stay around 3 percent in the long term, according to Reuters.

Speaking at a conference on manufacturing, McTeer said consumer confidence numbers issued in recent weeks were somewhat encouraging.

Techs still troubled

Bad news begets selling -- and less than stellar economic data didn't help any companies coming out with negative comments.

But analysts remain somewhat optimistic, saying the churning action is part of the process for a market turning the corner.

"The bottoming process is going to take an awfully long time," Charles Pradilla, chief investment strategist with SG Cowen, told CNNfn's Before Hours. "There's been absolute decimation for many, many stocks, and there are many nervous shorts out there so you don't need much to spark a fairly vigorous move."

graphicAgilent Technologies (A: down $2.82 to $27.80, Research, Estimates) said late Thursday that demand for its computer testing gear and other products has slackened in recent weeks, meaning sales will be below forecasts for the latest quarter. The company also said its employees will take a temporary 10 percent pay cut in order to reduce costs.

Sycamore Networks (SCMR: down $1.81 to $7.25, Research, Estimates) the network equipment maker, warned late Thursday it will report a fiscal third-quarter loss -- as opposed to the profit analysts expected. It also plans to lay off 13 percent of its work force and take a restructuring charge of $140 million-to-$150 million.

Other network equipment makers that fell on Sycamore's news included Juniper Networks (JNPR: down $3.36 to $33.80, Research, Estimates) and Ciena (CIEN: down $4.44 to $34.25, Research, Estimates).

Tellabs (TLAB: down $7.00 to $33.75, Research, Estimates) said it is cutting its first-quarter earnings per share estimate to 29 cents from 36 cents due to lower or deferred spending by telecom carriers. It was the second time in a month that the telecom and optical equipment maker trimmed its expectations.

  graphic EARNINGS WARNINGS  
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    According to First Call, the consensus estimate of Wall Street analysts is forecasting four consecutive quarters of declining earnings in the tech sector, based on the 83 tech firms in the S&P 500.

    The selling spilled into the broader tech market, hurting IBM (IBM: down $0.26 to $97.95, Research, Estimates), Hewlett-Packard (HWP: down $2.02 to $28.75, Research, Estimates), and JDS Uniphase (JDSU: down $1.75 to $14.44, Research, Estimates).

    Elsewhere, Intel (INTC: down $2.00 to $23.62, Research, Estimates) said it was cooperating with an ongoing investigation by regulators in Europe about its marketing practices. A similar probe of the chipmaker by the U.S. Federal Trade Commission resulted in no action last year.

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    With the flood of negative pre-announcements from semiconductor firms, Prudential Securities analyst Shekhar Pramanick suggested a sustained rally is unlikely -- and cautioned about further downside moves if revenues don't stabilize.

    In a note to clients, Pramanick mentioned Novellus Systems (NVLS: down $1.31 to $37.25, Research, Estimates),  KLA-Tencor (KLAC: down $1.19 to $36.00, Research, Estimates), and Teradyne (TER: down $1.64 to $29.61, Research, Estimates).

    It wasn't just tech stocks taking a hit. Hurting the Dow were United Technologies (UTX: down $1.37 to $73.78, Research, Estimates), Caterpillar (CAT: down $1.23 to $44.55, Research, Estimates), and Boeing (BA: down $0.83 to $55.98, Research, Estimates).

    Trouble for PG&E

    Pacific Gas & Electric (PCG: down $4.18 to $7.20, Research, Estimates), California's largest utility, said Friday it filed for bankruptcy protection from creditors because of its unreimbursed power costs that are now running at more than $300 million a month.

    California's other main investor-owned utility Edison International (EIX: down $4.39 to $8.25, Research, Estimates) also faces trouble from the power crunch on the West Coast. 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.