Earnings Cloud Follows Nasdaq Into 4th Quarter
The fourth quarter got off to a rocky start Monday with the Nasdaq composite index tumbling to its lowest level in four months as earnings worries continued to dog the stock market.
The tech-heavy Nasdaq slid 103.92 points to close at 3,568.90--a loss of almost 3%--with losers outnumbering gainers by almost 2 to 1. It was Nasdaq’s seventh loss in the past eight trading sessions. The index is now down 12.3% this year.
“There are earnings concerns out there,” said Barry Hyman, chief investment strategist at Weatherly Securities. He said the market is not going to get much upward momentum until there are “decent earnings reports coming in the tech sector.”
But Xerox, the dominant U.S. maker of copier machines, just deepened the gloom after regular trading ended: The firm said it expects to post a loss in the third quarter. In after-hours trading, Xerox plunged $2.94 to $13 a share.
Blue chips had fared better Monday in regular trading. The Dow industrial average closed up 49.21 points at 10,700.13. The Standard & Poor’s 500 index eased slightly. Losers outnumbered winners 4 to 3 on the New York Stock Exchange.
“The volatility is going to stay with us because valuations for stocks aren’t cheap, especially in technology,” said Rick Jandrain, chief investment officer for equity securities at Banc One Investment Advisors in Columbus, Ohio. “In 1999, the market was just dominated by technology and this year it’s totally different.”
The market fell sharply in September amid growing uneasiness about profits.
Investors are nervous because of increasing indications that the economy is slowing, the latest being an industry report Monday that suggested that the nation’s manufacturing activity contracted for the second straight month.
In the tech sector, chip maker Intel fell $1.44 to $40.13 on Monday, extending a steep decline triggered by a profit warning last month. Also, Microsoft was down $1.19 to $59.13 after trading at a 52-week low of $58.25.
Internet stocks were hard hit. Yahoo dropped $4.94 to $86.06, Vertical.net slid $4.75 to $30.38, Goto.com fell $2.50 to $14 and DoubleClick sank $2.38 to $29.63.
But telecom equipment maker Lucent climbed $2.44 to $31, as did rival Nortel Networks, which was up $2 at $62.38.
However, Gary Kaltbaum, a technical analyst at JWGenesis, said he believes tech issues, as a sector, will remain depressed.
“When you have names like Intel and Dell and Microsoft under pressure, you can’t expect much,” he said. “I think it goes back to when market favorites and leaders are under pressure, the soldiers that fall behind them can’t do so well.”
But as investors fled tech stocks, they bought in such sectors as banking, energy, utilities and HMO stocks on Monday. Also, mutual-fund management firm Waddell & Reed surged $4.19 to $35.19 after saying it has been in merger talks.
Market Roundup: C13, C14
