Nasdaq Gives Up Last of Its 2000 Gains
It ain’t over till it’s over, and evidently it’s not over on Nasdaq.
Technology stocks were hammered for a second day Tuesday, as investors registered worry and disappointment over some early first-quarter earnings reports.
The Nasdaq composite index slumped 132.30 points, or 3.2%, to end at 4,055.90. That left it down 0.3% from Jan. 1--the first time the index has been negative year-to-date since Feb. 1.
As on Monday, when Nasdaq tumbled 5.8%, the Dow Jones industrials benefited Tuesday as money fled “new-economy” tech stocks: The Dow rose 100.52 points, or 0.9%, to 11,287.08, pumped up by “old economy” names like DuPont and GM.
The blue-chip Standard & Poor’s 500 index now is up 2.1% year-to-date, while Nasdaq has fallen into the red.
The tech sector’s ongoing slide follows a period of unprecedented gains for many individual tech shares from October through early March. But the Nasdaq index peaked at 5,048.62 on March 10, and has suffered several heavy bouts of selling since--the worst of which was the record 13.6% intraday plunge on April 4.
Although the sector bounced back last Wednesday through Friday, many more investors have apparently been waiting in the wings to take profits. Nasdaq now is off 19.7% from its peak.
“More than a few portfolio managers found themselves overexposed to technology last quarter,” said William Meehan, chief analyst at Cantor Fitzgerald. “Some are getting out, and some are just sitting on their hands waiting for the market to settle down.”
Losers swamped winners by 29 to 12 on Nasdaq on Tuesday after a mid-afternoon rally failed. Volume remained moderate, with less than 1.7 billion shares changing hands--suggesting a “buyer’s strike” rather than a selling panic.
The tone in tech was set by semiconductor and wireless phone leader Motorola, which reported strong first-quarter earnings late Monday, but then warned Tuesday that it expects second-quarter earnings of 67 cents a share, below analysts’ consensus estimate of 70 cents, according to First Call. The company blamed competition in the wireless phone market.
Also depressing investor sentiment was biotech firm Biogen’s announcement after markets closed Monday of first-quarter earnings below estimates.
Motorola shares fell $26.25 to $124 and Biogen lost $12 to $53.
With most tech stocks still at high price-to-earnings ratios, any earnings shortfalls are likely to be badly received by investors, analysts warn. Earnings-reporting season begins in earnest this week.
Among other major tech stocks, Apple dropped $5.56 to $119.44, Oracle fell $5.13 to $77.38, Micron Technology lost $5 to $116.63 and Advanced Micro Devices slid $4.88 to $70.63.
In the biotech sector, Genentech slid $20 to $136.50, Human Genome Sciences fell $9.56 to $80.25 and Protein Design Labs sank $13 to $87.31.
Many of the stocks, however, still show hefty gains year-to-date. Apple, for example, started the year at $102.81; Micron was at $78.13 and Protein Design was at $70.
But that could work against the stocks if sentiment worsens. A Merrill Lynch survey showed the proportion of fund managers positive about technology stocks has fallen to 12.5% from 21.5% in March.
“Perception shifts very rapidly,” said Ken Pearlman, director of research for San Jose, Calif.-based Firsthand Funds, which oversees $7 billion in tech shares.
Meanwhile, some investors taking profits in tech shares are rushing to buy industrial, financial, drug, utility and other non-tech issues that had been all but forgotten during Nasdaq’s recent surge.
“This is a flight to the sales rack,” said David Sowerby, who helps oversee $8 billion at Loomis Sayles & Co. in Bloomfield Hills, Mich. “Investors are looking for stocks that have lower average P/Es and a quality earnings history as well.”
Among Tuesday’s highlights:
* Smaller-stock indexes fell with Nasdaq. The Russell 2,000 fell 1.6% and the Standard & Poor’s small-cap 600 lost 1.1%.
* Many Internet shares continued to fall. Yahoo fell $8.50 to $133.50, and now has dropped 33% since March 27. Redback Networks tumbled $18 to $114.75; Broadcom fell $17.88 to $176.63.
* Among old-economy blue chips rising, DuPont gained $1.50 to $59, GM rose $1.44 to $87.44, Coca-Cola rose $2.19 to $47.19 and Schering-Plough surged $3.38 to $41.81.
* Among utilities, BellSouth rose $2.19 to $52.31 and Duke Energy gained $1.13 to $55.19.
* Energy stocks gained. Baker Hughes rose $2.75 to $28.75 and Chevron jumped $2.63 to $88.69.
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Day’s Winners, Losers, C9-C10
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Change in Leadership
The tech-oriented Nasdaq composite, which paced the market in 1999 and earlier this year, now has fallen to a net loss for the year. How some of the major stock indexes have fared year-to-date:
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Index YTD % change S&P; mid-cap 400 +6.8% S&P; 500 +2.1 Wilshire 5,000 total market +1.2 Russell 2,000 (smaller stocks) +1.1 Nasdaq composite -0.3 Dow industrials -1.8
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How a sampling of sector indexes have done:
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Index YTD % change Philadelphia semiconductor +60.7% S&P; utilities +8.5 Bloomberg REIT +4.3 S&P; financials +3.7 Amex oil -1.7 Interactive Week Internet -5.7
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Source: Bloomberg News
