Continuing Tech Sell-off Pulls Nasdaq Lower
Selling in technology stocks swelled again on Tuesday, driving the Nasdaq composite closer to its May low.
But some of the money fleeing tech shares poured into “old-economy” sectors, limiting the Dow Jones industrial average’s loss to 44.03 points, or 0.4%, to 10,524.40.
In commodity markets oil prices continued to resurge amid colder U.S. weather and Middle East tensions.
On Wall Street the Nasdaq composite dived 115.02 points, or 3.4%, to 3,240.54 as many investors continued to exit the beleaguered tech sector, amid worsening fears about sales and earnings growth.
With Tuesday’s plunge Nasdaq has fallen 23% just since Sept. 1. What’s more, the index now is only 2.3% above its May 23 low of 3,164--which was the bottom after the tech-stock collapse of April and May.
Losers swamped winners by 2 to 1 on Nasdaq in heavy trading of nearly 1.9 billion shares.
Tech shares were dragged down Tuesday after analysts at Salomon Smith Barney and Lehman Bros. downgraded chip makers Xilinx and Altera, citing weak market conditions.
That pulled the SOX chip-stock index down 10.1% for the day.
After trading ended there was more bad news, as telecom equipment giant Lucent Technologies again warned it won’t meet analysts’ earnings expectations.
“The investor or trader needs to be very cognizant that we are in a very unsteady, very fragile market and I don’t think we’re going to turn around for any sustainable rally until we get out of this earnings season,” said Ricky Harrington, a technical analyst at Wachovia Securities in Charlotte, N.C.
Markets also were riled Tuesday by more rumors of junk-bond trading losses at major brokerages.
Commodity price gains only worsened the mood: Crude oil for November delivery rose $1.32, or 4.1% to $33.18 a barrel in New York, the highest in three weeks.
Unusually low temperatures are forecast to continue in the eastern U.S., boosting demand for heating oil earlier than usual.
Still, some stock traders were heartened that many investors aren’t exiting the market entirely, but rather are buying issues they perceive to be safer.
That shift drove up drug, energy, utility and food stocks on Tuesday, among others.
Among Tuesday’s highlights:
* Tech stocks falling sharply included Cisco Systems, down $2.56 to $51.13; Vitesse Semiconductor, down $13.63 to $78.63; Intel, down $1.50 to $37.56; Rational Software, down $3.44 to $54.38; and Oracle, down $2.13 to $64.63.
* Brokerage stocks were led lower by Morgan Stanley Dean Witter, down $8.75 to $74.50; Lehman Bros., down $7.25 to $123.81; and Bear Stearns, down $3.13 to $54.25.
* On the plus side, energy stocks rallied with oil prices. Apache surged $7.94 to $63.50, Transocean Sedco gained $3.19 to $60.50 and Chevron added $1.19 to $87.19.
* Drug stocks gained as investors sought safer havens. Schering-Plough rose $2 to $49.25 and Johnson & Johnson jumped $3.31 to $94.63.
Other consumer-products names rising included Avon, up $1.13 to $43.56, and Carter Wallace, up $2.44 to $27.25.
