Big Board Glitch, Profit Woes Hit Stocks
Stocks slid Friday as jitters over sagging corporate profits resurfaced and a technical glitch shut down trading on the New York Stock Exchange for much of the morning.
The technology-laden Nasdaq Stock Market, which traded throughout the NYSE’s stoppage, led the way down after a weaker revenue forecast from network equipment maker Juniper Networks damped initial optimism built up by computer chip giant Intel’s benign sales outlook.
“Juniper hurt the market,” said Jon Burnham, who manages the Burnham fund. “The perception is that the declines aren’t over yet. People are worried about when the economy will reverse [its downward trend] and what will happen to earnings and revenues.”
The Dow Jones industrial average skidded 113.74 points, or 1%, to 10,977.00. Ten of the blue-chip average’s issues failed to open in the morning, and the complete average was available only when IBM resumed trading at around 1:40 p.m EDT--or less than 2 1/2 hours before the closing bell.
The trading halt created the lightest-volume trading day for the NYSE this year. Only about 723 million shares changed hands, a little more than half of the Big Board’s average daily volume of 1.2 billion shares. Nasdaq traded 1.43 billion shares, less than the average daily volume for May.
The Nasdaq composite index fell 48.90 points, or 2.2%, to 2,215.10. Declines in tech shares hit the broader Standard & Poor’s 500 index as well, sending it down 12 points, or 0.9%, to 1,264.96. The Dow ended the week down 0.1%, Nasdaq was up 3.1%, and the S&P; 500 up 0.3%.
A problem in new trading software that the NYSE installed overnight caused failures in trading on half of the floor of the exchange in the morning, so exchange officials decided to shut down the entire trading floor at 10:10 a.m. EDT. It reopened 85 minutes later at 11:35 a.m. It was the first time a system glitch shut down the exchange since Oct. 26, 1998.
Stock declines accelerated after trading resumed.
Intel, the world’s largest semiconductor maker, said late Thursday that quarterly sales will be within its previous range of expectations, lifting hopes the worst is over for the battered chip industry, and its shares rose in Thursday’s after-hours trading.
But Intel slipped 47 cents to $30.67 on Friday after Juniper lowered its quarterly revenue estimates. Juniper also said it will cut its work force by 8% to 9% because of the slowdown in the telecommunications and network service provider sectors.
Intel was Nasdaq’s most heavily traded stock, while Juniper was the second most active and fell $8.61 to $38.02.
Mobile phone technology company Qualcomm lost $3.76 to $61.24, phone equipment maker Nortel Networks fell 60 cents to $12.53, and JDS Uniphase, the biggest producer of fiber-optic equipment, fell $1.01 to $16.05. “Today investors are unhappy about the [earnings] pre-announcements,” said Kevin Bannon, portfolio manager for BNY Asset Management. This quarter “is not going to be a positive one. In fact, I suspect it’ll be the weakest quarter in the year.”
Indeed, computer network equipment maker 3Com said after Thursday’s close that it expects quarterly sales to fall short of previous forecasts because of the slumping U.S. economy. 3Com lost 20 cents to $5.46 on Friday.
Among Friday’s market highlights:
* Friday marked the first day of trading for WorldCom’s tracking stocks. WorldCom shares, which track the company’s data and business services units, rose 15 cents to $17.85. MCI Group shares, which track the company’s long-distance and dial-up Internet services, rose 5 cents to $18.06.
* NetZero rose 22 cents to $1.17 and Juno Online Services rose 31 cents to $1.79 the day after the last two companies offering free Internet service agreed to merge.
* Internet search software maker Verity said it filed a lawsuit in a U.S. district court against software maker BroadVision, saying BroadVision violated certain Verity copyrights and engaged in unfair competition, among other claims. Verity climbed $4.08 to $23.39, and BroadVision slipped 42 cents to $5.75.
* Weyerhaeuser claimed a tentative victory in its bitter battle for representation on smaller rival Willamette Industries’ board, a move that could pave the way for the forestry products company to emerge triumphant in its $5.5-billion hostile takeover bid for Willamette. Weyerhaeuser fell 92 cents to $57.93, while Willamette rose 93 cents to $49.71.
Market Roundup, C4-5
