Nasdaq Ends Off 129; Dow Down 77
Nasdaq Ends Off 129; Dow Down 77
Jul. 05, 2000
NEW YORK (AP) _ Technology stocks fell steeply Wednesday after Computer Associates became the latest company to warn that profits won't meet expectations. An analyst's cautious outlook on the semiconductor industry added to high-tech's woes.
``The damage is fairly well concentrated in the technology stocks,'' said William Meehan, chief market analyst for Cantor Fitzgerald. ``It's feeding on itself.''
The Nasdaq composite index fell 128.83 to close at 3,863.10, its worst performance since May 23.
Blue-chip technology components weren't immune from the selloff. The Dow Jones industrial average fell 77.07 to 10,483.60, with IBM contributing most to the decline.
Broader stock indicators were also lower. The Standard & Poor's 500 index was down 23.09 from Monday's revised close, finishing at 1,446.23.
Computer Associates plummeted $21.531 to $29.594, a 42 percent drop. Shortly after midnight Tuesday, the company surprised Wall Street analysts by warning that its fiscal first-quarter results would badly miss expectations.
The warning raised fears that other technology companies will also issue disappointing results when the earnings reporting season goes into full gear later this month.
Sure enough, BMC Software said Wednesday morning that fiscal first-quarter earnings will be 18 to 21 cents a share, compared with analysts' consensus prediction of 46 cents. Its shares fell $14.188 to $21.313 on the Nasdaq.
Even the largest technology companies fell prey to investors' worries about earnings. IBM fell $5.875 to $104.
The semiconductor sector tumbled after Salomon Smith Barney analyst Jonathan Joseph said a decline in sector shipments and prices was evidence of a growth slowdown over the next six to nine months. Intel, a bellwether for the group, fell $5.25 to $131.625 although Joseph didn't single it out.
Also, Oracle fell $7.813 to $72.375 after J.P. Morgan analyst William Epifanio downgraded the stock to ``market performer'' from ``buy.'' Epifanio cited concerns over Oracle's plan for management succession after president and chief operating officer Ray Lane stepped down last week.
``We regard Ray Lane's departure as extremely negative news,'' Epifanio said, noting that Lane provided balance to CEO Larry Ellison, who is known for his brash style.
The technology-dominated Nasdaq has gained substantial strength in the past weeks, rising more than 20 percent above the lows it touched in late May. But investors remain nervous, Meehan said, and appear unwilling to help the Nasdaq break out of a relatively tight trading range.
``Perhaps we won't be able to break this range until we see the actual second-quarter numbers,'' he said, noting that most companies are expected to show strong profit growth.
Oil stocks were also lower in the first trading session since Saudi Arabia signaled it may soon begin producing an additional half-million barrels a day. The Saudis said in a statement Monday they will provide higher production within a few days if crude prices don't quickly head lower toward their preferred price of about $25 a barrel.
Exxon Mobil fell $2.609 to $76.938.
Financial stocks improved on the news that a key gauge of future economic activity fell in May, suggesting that the Federal Reserve's efforts to put the brakes on economic expansion are working.
The Index of Leading Economic Indicators declined by 0.1 percent, primarily because of a pullback in manufacturing and a decline in stock prices. The report raised some hopes that the Fed will leave rates unchanged at its next meeting on Aug. 22.
Citigroup rose 81.25 cents to $63.25.
Advancing issues outnumbered decliners by a slender margin on the New York Stock Exchange, where volume came to 979.73 million shares. The stock market was closed on Tuesday for the Independence Day holiday.
The Russell 2000 index of smaller companies fell 5.79 to 518.25.
Overseas, Japan's Nikkei stock average fell 0.2 percent. Germany's Xetra DAX index rose 0.3 percent, Britain's FT-SE 100 was down 0.5 percent, and France's CAC-40 was down 0.5 percent.
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