Tech Issue Woes Help Drag Down Rest of Market

Technology stocks sagged Wednesday in the wake of a disappointing sales forecast from computer maker Hewlett-Packard and sour investment calls on the tech sector from several Wall Street brokerages.

Through Tuesday, the Nasdaq composite index had soared more than 30% from its six-year low Oct. 9, spurring some to question whether the recent rally had come too far, too fast.

Adding to the selling mood, Hewlett Chief Executive Carly Fiorina trimmed the company’s 2003 revenue guidance late Tuesday, fueling doubts about a pickup in business capital spending, and downgrades on tech stocks early Wednesday from analysts at Morgan Stanley, Deutsche Bank and A.G. Edwards cast more doubt on the sector.

“There are worries that the tech and telecom sector is not as sure-footed as people thought it was,” Stephen Kolano, an equity trader for Mellon Growth Advisors in Boston, told Reuters.

The tech-oriented Nasdaq slid 18.61 points, or 1.3%, to 1,430.35, while blue-chip indexes held up better: The Dow Jones industrial average dipped 5.08 points, or 0.1%, to 8,737.85 and the broader Standard & Poor’s 500 dropped 3.18 points, or 0.4%, to 917.57.

It was the fourth straight losing session for the Dow and the S&P; 500, and the third in four days for Nasdaq. Losers outnumbered winners by about 3 to 2 on Nasdaq and by a slim margin on the New York Stock Exchange, on active trading.

Investors largely shrugged off two upbeat economic reports issued Wednesday morning: The Labor Department said productivity grew at a faster-than-expected annual rate of 5.1% in the third quarter, and the Commerce Department said orders to U.S. factories rose 1.5% in October, the first gain in three months.

Though the broad market was flat, some industrial stocks got a lift, including United Technologies, up $1.20 to $62.75.

Among tech names, however, HP sank 86 cents to $18.37 in the wake of Fiorina’s cautious guidance.

In the software industry, J.D. Edwards slipped $1.59 to $12.64 and PeopleSoft fell $1.50 to $18.06 after executives at those firms also issued cautious outlooks.

Meanwhile, Morgan Stanley said fundamentals might not pick up fast enough to justify the robust recent rally among semiconductor, chip equipment, electronic manufacturing and computer hardware companies. IBM lost $1.52 to $83.69, Intel sank 57 cents to $19.74 and Applied Materials dropped 86 cents to $15.11.

Deutsche Bank downgraded several tech stocks to “sell” from “hold,” including National Semiconductor, off $1.68 to $17.50; Linear Technology, off $2.14 to $29.72; and Analog Devices, down $1.93 to $27.64.

KLA-Tencor slipped $2.19 to $40.09 after A.G. Edwards lowered its rating on the stock to “hold” from “buy.”

Earnings concerns spurred selling elsewhere, too.

Walt Disney fell 86 cents to $17.68 after cutting its fourth-quarter earnings, citing weak ticket sales for the animated film “Treasure Planet.” Federated Department Stores dropped 73 cents to $31.25 after it said November sales at stores open at least a year fell 7.4%.

In other highlights:

* Treasury yields fell as some traders shifted assets out of the equity market, seeking safety in government debt. The yield on the benchmark 10-year T-note eased to 4.15% from 4.20% on Tuesday.

* Some drug and consumer stocks rallied as investors turned to blue-chip names as an alternative to tech. Tobacco company Philip Morris rose $1.28 to $39.60 and Procter & Gamble gained $1.56 to $86.05.

* Tenet Healthcare rose 91 cents to $18.75 after the hospital chain cut its earnings outlook for the next two years, citing concerns about its aggressive pricing strategy, but promised to buy back shares in 2003.

Market Roundup, C6-7