Bad Tech News Spreads Worries
Major stock indexes sagged Tuesday as investors braced for more bad earnings news from technology companies after Monday’s surprise warning from IBM.
But the broader market fared better than key indexes suggested.
A swirl of rumors that Cisco Systems would warn that its quarterly earnings would miss forecasts shaved more than 8% off its share price and ignited another sell-off in big-name tech stocks.
“Post-IBM, people are probably a little sensitized,” said Jeff Van Harte, head of equity investments at Transamerica Investment Management. “Some of these stocks are anticipating a pretty good rebound in earnings, so I think any time you get more warnings, people are worried about the valuations.”
The tech-laden Nasdaq composite lost 43.30 points, or 2.4%, to 1,742.57, its lowest close in five weeks and another step toward its 2002 low close of--1,716.24 on Feb. 21.
The Nasdaq 100 index, heavily weighted with popular technology issues, fell even more, losing 3.4%.
The blue-chip Dow Jones industrial average dropped 40.41 points, or 0.4%, to 10,208.67, while the broader Standard & Poor’s 500 index lost 0.7% to 1,117.80--its lowest level in more than a month.
Although the major indexes slid, losers led winners by a modest 6-5 margin on Nasdaq, while advancers actually led decliners by the same margin on the New York Stock Exchange. Trading was moderate.
Computer networker Cisco dropped $1.36, or 8.4%, to a five-week low of $14.82 and ranked as the most active stock on Nasdaq, amid rumors that it would issue an earnings warning.
A Cisco spokeswoman said the company doesn’t comment on rumors. Analysts said investors may have been selling Cisco because IBM on Monday indicated overall demand is weak, and because telecom gear maker Nortel Networks on Tuesday said sales fell more than expected in the first quarter.
In addition, RBC Capital Markets analyst Sanjiv Wadhwani reduced his profit estimate Tuesday for Cisco’s fiscal fourth quarter, which ends July 27.
Investors are hungry for further clues on the health of corporate profits in the tech sector after conflicting outlooks from Compaq Computer and IBM.
Compaq, the world’s No.2 personal computer maker, said Monday it would meet or top analysts’ first-quarter estimates. But Compaq slipped 31 cents to $9.28, dragged down with the broader market. Compaq plans to merge with computer maker Hewlett-Packard. Shares of HP, a Dow component, climbed 29 cents to $17.41.
IBM rose 33 cents to $87.74, after slumping more than 10% on Monday. IBM blamed soft results on technology spending cutbacks by businesses.
Communications chip makers weakened. Applied Micro Circuits fell 44 cents to $7.50. Other chip stocks also sank, led by Intel, which dropped $1.47 to $28.46. Software giant Microsoft lost $1.39 to $32.43.
Oil prices, which have surged in past weeks on escalating violence in the oil-rich Middle East, dipped 72 cents to $25.82 a barrel.
Gold, meanwhile, fell $1.70 to $298.80 an ounce--its first close below $300 in almost two weeks.
In other market news:
* Oil stocks tracked oil prices lower. Exxon Mobil lost 52 cents to $42.72. ChevronTexaco lost $1.11 to $87.29.
* Eastman Kodak was one of the day’s bright spots, and it helped underpin the Dow. It rose $1.39 to $32.43 on hopes the camera and film maker is recovering from a demand slump brought on by the weak economy and the Sept. 11 terrorist attacks. Late Monday, Salomon Smith Barney upgraded the stock to “outperform” from “neutral.”
* The S&P; index of 600 small-company stocks rose 0.2% as investors continued to show interest in smaller stocks. The index is up 6.8% this year, compared with a loss of 2.6% for the S&P; 500.
* Instinet Group fell 17 cents to $6.83. The electronic stock trading system, which has been losing market share to rivals, said Chief Executive Doug Atkin resigned “to pursue other interests.”
Market Roundup, C8-9
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Big Tech Shares Lead Sell-Off
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