Strong Tech Earnings Don’t Halt Markets’ Decline

Good news abounded Thursday, but Wall Street wasn’t buying any.

Despite strong profit reports from some market leaders, a technology stock rally fizzled late in the day, dragging the Nasdaq stock market to its fourth straight loss and deeper into bear market territory.

The Nasdaq composite index fell 92.85 points, or 2.5%, to 3,676.78--just 27 points above the intraday low the index hit April 4, the day it plunged 13.6% before recovering in late trading.

Meanwhile Thursday, the Dow Jones industrial average, which had been on the rise since mid-March as Nasdaq slumped, dropped 201.58 points, or 1.8%, to 10,923.55 as investors also turned against many “old-economy” stocks.

But Nasdaq’s stunning decline remains the focus of investors worldwide. The buy-at-any-price mentality that prevailed in the tech sector during its spectacular run-up in January and February has given way to a sell-now, ask-questions-later mentality, traders say.

So far this week the tech-dominated Nasdaq composite index has fallen 17%, nearly matching its worst week ever: the week of the crash of 1987, when it slid 19%.

From its peak March 10, the index is down 27.2%, marking the first Nasdaq bear market since late summer 1998. A bear market is considered a decline of 20% or more in key indexes.

Many analysts warned after the April 4 intraday plunge, and the three-day rally that followed it, that Nasdaq would probably “retest” the April 4 low of 3,649. But most didn’t expect that retest to come so quickly.

Investor sentiment remains rotten, traders said, with some sellers motivated by a desire to protect profits, while latecomers to the winter Nasdaq surge now are trying to stem heavy losses. Nasdaq losers outnumbered winners by 2 to 1 on Thursday, not as lopsided as in recent days but still extremely bearish.

Some Wall Street pros say today will be a crucial test of whether tech stocks can regroup or will slump further.

“The techs have to go higher,” said Arthur Hogan, chief market analyst at Jefferies & Co. in Boston. “We need something positive going into the weekend.”

Thursday started out promising for Nasdaq: After the close of the market Wednesday, computer chip company Advanced Micro Devices reported quarterly profit that was nearly double what analysts had expected.

Though AMD is a New York Stock Exchange issue, its bullish earnings report helped buoy many Nasdaq tech shares.

The Nasdaq composite gained as much as 145 points by early afternoon. But the rally couldn’t be sustained, and the index plunged in the last 45 minutes of trading amid heavy turnover. Share volume reached 1.95 billion shares.

Among key tech issues dropping sharply near the close were Cisco Systems, which ended down $3.88 to $61.13; Veritas Software, down $12.25 to $91.69; and Applied Materials, down $8.56 to $89.

AMD, whose shares ended regular trading at $68 on Wednesday, surged as high as $76 in after-hours activity that day. They closed Thursday at $71.

But other tech firms that reported strong earnings gains Wednesday plunged nonetheless Thursday, including chip company Rambus. It lost $11.19 to $202.63 even after an analyst at Warburg Dillon Read issued a “strong buy” recommendation on the shares.

Investors ignored earnings fundamentals as they drove the Nasdaq to its highs--paying unprecedented price-to-earnings multiples--so it may be fitting that they are ignoring positive fundamentals as they pound the market back down, said Michael Vogelzang, president and chief investment officer of Advest Group’s Boston Advisors unit.

After trading ended Thursday, Sun Microsystems and Juniper Networks, both key players in the Internet infrastructure business, reported earnings well above estimates.

Sun fell $2.25 to $77.75 in regular Nasdaq trading but rose to $79.63 in after-hours activity. Juniper fell $29.13 to $175 in regular trading but surged to $184 after hours.

Analysts said those reports, and the stocks’ gains in late trading, could provide some fuel for a quick start this morning.

But Thursday’s trading discouraged many pros.

“We missed an opportunity to run with good news,” said Gregory Nie, technical analyst at First Union Securities in Chicago. “The market action has given very little evidence that we’re ready to go up again.”

He sees 3,500 on the Nasdaq index as a more important psychological benchmark than the 3,649 low hit midday April 4. If Nasdaq falls to 3,500 and can’t rally back strongly, Nie foresees a far deeper and more extended downturn, one that would qualify as a true bear market in almost anyone’s opinion.

Although Nasdaq is now down more than 27% from its peak, it has fallen only to the levels of December and remains 46% above where it stood a year ago.

In Nie’s view, it isn’t much of a bear market--at least not yet.

Vogelzang argued that the relative lack of redemptions so far from aggressive stock mutual funds could be a positive for the market.

Noting that many fund managers were getting heavy inflows even last week, “Where’s that money going?” Vogelzang asked. “They [fund managers] have to put it to work somewhere, so our best guess is we’ve probably seen the worst.”

Among Thursday’s highlights:

* Major tech stocks falling further included IBM, down $3.13 to $110.63; Vitesse Semiconductor, down $9.13 to $66.88; JDS Uniphase, down $4.13 to $92.31; and Hewlett-Packard, down $3.06 to $131.94.

* Internet names continued to see heavy selling. Broadcom fell $13.94 to $144.06, Inktomi dropped $12.44 to $110.56 and Amazon.com lost $8.38 to $48.

* Among the day’s tech winners were Apple, up $4.56 to $113.81; Compaq, up 50 cents to $26.63; and Motorola, up $1.13 to $117.

* Some beaten-down biotech shares also rallied, including Imclone Systems, up $3.75 to $79; Genentech, up $8 to $136; and PE-Celera Genomics, up $8 to $88.

* Among old-economy stocks, General Electric led the Dow lower, down $6.25 to $150.50 despite a strong earnings report.

Also falling were Home Depot, down $3.50 to $62.50; J.P. Morgan, down $5.19 to $131.50; and DuPont, down $2.75 to $59.25.

* Bank stocks in general were lower. FleetBoston Financial beat analysts’ profit estimates in an earnings report released before the market opened, but the shares still dropped $1.06 to $37.25.

* In the bond market, Treasury yields ended lower as some money exiting stocks headed for bonds.

Market roundup, C6-C7

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Beating the Numbers

Many tech companies have reported first-quarter earnings that have beat analysts’ consensus estimates, but the results aren’t yet helping to stem the Nasdaq composite index’s decline. Below, a sampling of earnings results:

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Stock data: Stock data: 1st.-qtr. EPS: 52-wk. Thurs. Company Est. Actual high close Adv. Micro. Dev. $0.57 $1.15 $79.19 $ 71.00 Sun Microsystems 0.23 0.26 106.75 77.75 Check Point Soft. 0.35 0.40 295.00 167.00 Juniper Networks 0.03 0.06 312.94 175.00 FileNet 0.15 0.18 46.81 24.50 Genentech 0.26 0.28 245.00 136.00 PMC-Sierra 0.16 0.17 255.50 125.56 Rambus 0.14 0.15 471.00 202.63

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EPS: earnings per share

Sources: Times research, Bloomberg News, First Call / Thomson Financial analyst estimates