Tech Stocks Driven Down Again

From Associated Press

Wall Street punished technology stocks for a seventh straight session Monday on fears the sector's worst days are still ahead. The sell-off sent the Nasdaq composite index to its first close below 2,000 since April.

The pessimism spread to the broader market, limiting the modest gains achieved by a handful of manufacturing and retail stocks. Better-than-expected results from Oracle after the close of regular trading weren't expected to cheer weary investors.

"Nortel, JDS Uniphase . . . all the heroes of yesteryear are being decimated because people are worried about when their earnings are going to improve," said Larry Wachtel, market analyst at Prudential Securities.

The Nasdaq composite index closed down 39.80 points, or 2.0%, at 1,988.63, its worst finish since April 16, when the index closed at 1,909.57.

The Dow Jones industrial average managed a small advance, thanks to gains in a handful of non-tech issues, rising 21.74 points, or 0.2%, to 10,645.38, its first advance since last Tuesday.

The broader Standard & Poor's 500 index fell 5.93 points, or 0.5%, to 1,208.43.

Although second-quarter earnings were expected to be bad, Wall Street has had a hard time adjusting to the spate of corporate earnings warnings that have been appearing recently.

Specifically, investors have been unnerved by reports of excess inventory and continued sluggish orders--both of which suggest the economy and business climate remain weak and may not recover until next year. The resulting sell-off has eroded much of the huge rally that sent the market soaring this spring.

Oracle fell 16 cents to $14.84 in regular trading before rebounding to $16.10 in the extended session on fiscal fourth-quarter results that beat expectations by a penny.

Nortel Networks fell $1.34 to $8.52 in the regular session on selling related to its earnings warning last week. Other big tech losers included Microsoft, down $1.14 at $66.88. JDS Uniphase was down $1.84 at $10.60, and Lucent Technologies dropped 70 cents to $5.61.

Blue chips fared better, getting boosts from Wal-Mart Stores, up 37 cents at $48.52, and General Motors, which rose $2.16 to $61.51. Wal-Mart helped the Amex retail index to a 1.3% gain--a rare area of strength Monday.

The Federal Reserve, which has cut interest rates five times so far this year, is scheduled to meet next week and possibly lower rates yet again. But not everyone is convinced that will be enough to stimulate the economy--or investors.

"I don't think there will be any reaction. I think people expect the Fed to cut and it's already priced in the market," said Matt Brown, head of equity management at Wilmington Trust.

Declining issues led advancers nearly 3 to 2 on the New York Stock Exchange and by 2 to 1 on Nasdaq. Volume was moderate.

Among Monday's market highlights:

* Crude oil fell 3%, the biggest drop in 3 1/2 weeks, on a report that OPEC raised production in May and may do so again in July if Iraq maintains an export halt. Crude oil for July delivery fell 96 cents to $27.55 a barrel on the New York Mercantile Exchange, the biggest decline since May 24. Prices are down about 15% from this time last year.

Energy stocks fell in sympathy. Oil service firm Schlumberger was off 68 cents to $56.62, while Exxon Mobil lost 40 cents to $88.50 and Chevron lost 99 cents to $95.70.

* Yields on short-term Treasuries fell, while yields on long-term issues rose, creating the widest gap between the two in seven years. The yield on the two-year Treasry note fell to 3.95% from Friday's close of 3.97%, while the yield on the 30-year Treasury bond rose to 5.70% from 5.68% Friday.

The yield on the two-year note fell on expectations of more Fed rate cuts, while longer-term yields rose after Boston Fed President Cathy Minehan said inflation "may become a concern" when the economy does recover.

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