Nasdaq Sell-Off Lets the Air Out of Jan. Bounce

So much for the January Bounce.

Two weeks ago, the Nasdaq Stock Market was up 16% for the year, basking in the glow of the buying that often buoys the stock market in January and taking some of the sting out of last year’s debacle.

After yet another sell-off of tech stocks Friday, that glow has now officially faded. The Nasdaq composite index tumbled 91.09 points, or 3.6%, to close at 2,470.97 and trimmed its year-to-date gain to a microscopic 0.02%.

The culprit was once again concern that slowing business at bellwether companies such as Dell Computer and Cisco Systems spells bad news for the entire tech sector.

“The market continues to focus on negatives. It is unfortunate that the momentum we had [in tech stocks] in January is fading,” said Donald Selkin, chief market strategist at Joseph Gunnar & Co.

The damage spread beyond tech stocks. The blue-chip Dow Jones industrial average, which was up 1.8% at its year-to-date high in January, fell 99.10 points, or 0.9%, to close at 10,781.45. The benchmark average has now lost 0.1% for the year.

The broader Standard & Poor’s 500 index fell 17.77 points, or 1.3%, to 1,314.76. It’s down 0.4% for the year.

Trading volume was sketchy. Winners trailed losers by a 7-8 margin on the New York Stock Exchange and by 2-3 on Nasdaq, where 1.8 billion shares changed hands.

For the week, Nasdaq was off 7.1%--its second straight weekly loss and worst performance since Dec. 15. The S&P; 500 dropped 2.6% for the week and the Dow 0.8%.

Bonds rallied as investors sought refuge from falling stock prices. The yield on the benchmark 10-year Treasury note--which moves in the opposite direction of its price--fell to 5.02% from its Thursday close of 5.08%.

Dell, the world’s No. 2 computer maker, fell $2.56 to $23.50 on a published report that it is preparing for major expense cuts and may consider layoffs. Dell, like other computer makers, faces slowing demand for personal computers.

Dell said it is cutting travel and other costs and was in the middle of an annual review, which typically ends in some job cuts.

Motorola fell 92 cents to $18.90 after the wireless technology company said it was cutting up to 12% of its work force--4,000 jobs--in its semiconductor unit in 2001 as a result of slowing demand.

Cisco, the world’s No. 1 computer networking company, continued to bleed after missing estimates Tuesday for the first time in more than six years and warning of slow growth. The stock fell $1.81 to $28.19 and is now down 18% since its surprise announcement.

The Federal Reserve cut interest rates two times this year to keep the U.S. economy out of recession. The market expects another interest-rate cut at the Fed’s next policy-setting meeting in March.

“The positive implications of lower interest rates are being offset by the negative implications of what people perceive to be deceleration in earnings growth and negative earnings,” Selkin said.

Widely held Lucent Technologies slipped $1.53 to $15.36 and ranked as the most actively traded issue on the NYSE. The telecom equipment giant said the Securities and Exchange Commission is investigating its accounting practices.

Finland’s Nokia dropped $2.03 to $27.99 after UBS Warburg removed the world’s largest mobile phone maker from its top 10 global technology stock picks.

That put a damper on the shares of telecommunications and telecom equipment companies. The S&P; telecom index fell 4.82%, while the S&P; communications equipment gauge shed 5.86%.

“We are not seeing any relief from earnings jitters or growth contraction and therefore the sector is not in favor,” said Alan Ackerman, a strategist at Fahnestock & Co.

The Dow was dragged down by technology components such as Hewlett-Packard, off $1.34 at $33.50, and IBM, down $2.10 at $112.

Helping to stem the slide was Home Depot, which gained 44 cents to $44.43, in line with a surge in the shares of Lowe’s, the world’s second-largest home improvement retailer, which said earnings will meet Wall Street forecasts. Lowe’s rose $3.51 to $53.51.

Microsoft, which fell almost 4% Thursday after Merrill Lynch soured on the software titan, lost $3.13 Friday to $59.13.

A Nasdaq bright spot was computer storage company Network Appliance, which gained $2.81 to $38 after its profit beat estimates.