Tech Stocks Lead Broad Sell-Off as Interest Rates Continue Climbing

Stocks slid in a broad sell-off Thursday, with high-flying tech stocks leading the way, as long-term interest rates continued to rise amid strong economic data.

The Nasdaq composite index, which has rocketed nearly 50% since the end of September thanks to soaring tech stocks, tumbled 83.34 points, or 3.3%, to 2,410.07.

It was the third-biggest point drop ever for the index, and in percentage terms it was the worst decline in four months.

Blue-chip shares also fell, though not as sharply: The Dow Jones industrial average lost 62.31 points, or 0.7%, to 9,304.50; the Standard & Poor’s 500 index sank 1.9%.

Tech stocks were hurt by heavy selling in semiconductor issues, after a Merrill Lynch analyst cut his 1999 earnings estimates for Intel and rival Advanced Micro Devices.

But Wall Street’s emerging worry may be interest rates, some analysts said. Although Federal Reserve policymakers met this week and voted to leave interest rates alone, the U.S. economy’s stunning strength could force the Fed to tighten credit sooner rather than later, experts say.

Those fears have been pushing Treasury bond yields higher in recent weeks. The yield on the bellwether 30-year Treasury bond, for example, rose to 5.29% on Thursday, up from 5.26% on Wednesday and the highest since Jan. 11.

Still, the rise in yields has been modest, analysts note. The 30-year bond yield has gyrated in a range of 5% to 5.3% since November.

Bond traders’ reaction today to the January employment report could foretell the near-term trend in yields. A large gain in jobs could convince more traders that the Fed is likely to raise short-term rates by midyear.

The stock market overall hasn’t shown much concern about rates in recent weeks. The Nasdaq index has continued to rocket, and the Dow has bounced between 9,100 and 9,400 since mid-January.

But one market sector--utility stocks--has been acting particularly poorly, analysts note. The Standard & Poor’s index of major electric and gas utility shares has tumbled 8% since Jan. 6.

Utilities often foreshadow significant moves in interest rates. Because investors mainly buy utilities for their dividend yields, the stocks compete with bonds. If investors assume bond yields will rise, they often will dump utility stocks.

The S&P; utility index slid 1.1% on Thursday.

But the heaviest selling was reserved for tech stocks that have been the market’s leaders.

Intel tumbled $8.56 to $130.13, a 6.2% drop, after Merrill Lynch analyst Tom Kurlak cut his 1999 earnings estimate for the chip maker to $4.45 a share from $4.60.

Intel is battling chip rival Advanced Micro Devices with deep price cuts to regain market share. AMD on Thursday warned that it may post an operating loss this quarter because of pricing weakness. Its shares plunged $2 to $18.94 before trading in them was halted.

Traders said any jitters over tech-company profits are bound to be magnified now because the stocks have been so strong. Intel was at $80 in late September.

“Technology is the key” to the market’s high valuations, noted Larry Wachtel, market analyst at Prudential Securities.

Among Thursday’s highlights:

* Other tech leaders slammed by profit-taking included Microsoft, down $7.75 to $159.06; IBM, down $5.69 to $169.56; Dell, down $5.50 to $102.38; Cisco Systems, off $5.88 to $105.25; and Texas Instruments, off $5.63 to $96.

Also, computer networker Newbridge Networks slid $5.56 to $27.50 after warning of weaker-than-expected earnings for the near term.

* Online brokerage shares were sharply lower after soaring in recent days. Siebert Financial slid $6.25 to $43.25, and National Discount Brokers fell $8.63 to $29.

But brokerage J.B. Oxford, recently a $2 stock, rose $3.88 to $15.88 on huge trading volume of 33 million shares.

* On the plus side, some investors snapped up industrial stocks that could benefit from the economy’s continuing growth. Alcoa rose $3.63 to $86.69, International Paper gained $2.63 to $44.19 and USX-U.S. Steel jumped $1.44 to $26.69.

Railroads also rose, for the same reason. CSX gained 75 cents to $41.63 and Union Pacific surged $1.38 to $53.50.

* Gold stocks jumped, tracking industrial shares. Barrick Gold leaped $1.13 to $20.31; Placer Dome gained 44 cents to $12.

Near-term gold futures rose $2.20 to $290.20 an ounce in New York. Silver futures, which have been surging in recent days on concern about tight supplies, soared 21.7 cents to $5.76 an ounce.

Market Roundup, C6

Utility Spotlight, C7