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Tech Stocks Pummeled Again; Dow Off 149

October 18, 2000|From Times Staff and Wire Reports

Investors who couldn't buy enough technology stocks early this year seem to have disappeared from the planet: Tech shares tumbled again on Tuesday as sellers were forced to sharply mark down prices to get anyone to take their stocks.

The latest selling wave drove the Nasdaq composite index down 76.32 points, or 2.3%, to 3,213.96, and did far worse damage to certain tech sectors.

The SOX semiconductor stock index, for example, plummeted 9.3%. The Interactive Week Internet index slid 4.9%.

The broad market also was down again, with the Dow Jones industrial average falling 149.09 points, or 1.5%, to 10,089.71.

The market began to fall early in the day, and managed only a modest afternoon recovery from its worst levels.

At the close, the Dow was modestly above its closing low of 10,034 last Thursday, before Friday's big rally.

As third-quarter corporate earnings reports dominate the news, investors are reacting vehemently to any disappointments--even though many of the stocks involved are already depressed.

Case in point: Teradyne, a maker of semiconductor testing equipment, said Tuesday that third-quarter earnings more than doubled. But the firm said it expects shipments to fall between 2% and 4% this quarter from the third.

The stock, already down from a 52-week high of $115.44, plunged $9.44 to $25.

Chip giant Intel appeared to provide some good news after regular trading ended, as the company reported earnings that beat expectations.

But IBM tumbled in after-hours trading on disappointment over its quarterly results, especially sales growth. The stock had risen $1.88 to $113 in regular trading but fell to $105.50 in after-hours activity.

Investors' general pessimism was reflected in the market's poor breadth: Losers topped winners by 21 to 8 on the New York Stock Exchange and by 27 to 12 on Nasdaq. Trading was heavy.

Also, smaller- and mid-sized shares were hammered. They had been pockets of strength in recent months. The Standard & Poor's small-stock index tumbled 2.4%.

"It's a disaster a day," said Gary Shilling, president of A. Gary Shilling & Co., which manages $100 million in Springfield, N.J. "You have a number of forces that suggest the economy is weakening, and therefore this disappointing earnings cycle is going to continue."

Other analysts, however, say the market is now in the throes of tax-related selling by mutual funds--which usually ends by early November--and that prices should bottom soon.

"I definitely think we've found a bottom," said Arthur Hogan, chief market analyst at Jefferies & Co. "Actually hearing from Intel and IBM is going to be the catalyst that takes us back north."

Investors fleeing stocks pushed into Treasury bonds, driving yields down. The yield on the 10-year T-note fell to 5.68% from 5.74% and now is at a 15-month low.

Oil prices inched up slightly amid ongoing fears about the crisis in the Middle East.

Among Tuesday's highlights:

* Chip-related stocks falling sharply included Xilinx, down $6.94 to $64.50; Applied Materials, down $4.25 to $44.50; Texas Instruments, down $3.38 to $40.19; and KLA Tencor, down $3.38 to $28.06.

Also, Micron Technology slid $4.69 to $29 after two analysts cut their ratings on the computer-memory chip maker, saying that slower-than-expected sales growth may cut into profits.

PaineWebber's David Wong lowered Micron to "attractive" from "buy" and said the stock will reach $50 in 12 months, down from his prior forecast of $110. Morgan Stanley Dean Witter analyst John Cross lowered his rating to "outperform" from "strong buy."

* Bank and brokerage shares slid on fears about trading losses and loan losses in a sinking market. Goldman Sachs slid $4.38 to $99.25, Bank One fell $1.81 to $32.81 and Bank of America dropped $2.44 to $42.75.

* On the plus side, drug stocks were strong as investors looked for "safe-haven" issues. Pfizer rose $1.25 to $44.94 and Merck was up $1.31 at $78.19.

Many biotech stocks also rallied, including Human Genome Sciences, up $5.81 to $95.88, and Genentech, up $2.63 to $149.38.

Market Roundup: C10, C11

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