Tech Woes Sink Stocks

Warnings from Apple Computer, Advanced Micro Devices and Ciena sparked a technology sell-off Wednesday, sending the Nasdaq composite index to a new low for the year as Wall Street grew more pessimistic about the timing of a business turnaround. The Dow Jones industrials tumbled more than 140 points.

In other trading, Treasury bond yields plunged and the dollar sank.

The downward momentum in stocks was accelerated by the second suicide bombing in Israel in as many days and an FBI warning to its field offices about possible terrorist attacks on July 4. Analysts said the reports gave investors already skeptical about second-quarter earnings another reason to stay away.

“We’ve got a boatload of bad news, and more rumblings in the Middle East have investors very nervous,” said Tom Schrader, head of listed trading for Legg Mason Wood Walker. “On top of that, the FBI said there’s a potential for an attack on July 4. It’s a cornucopia of bad news.”

The Dow closed down 144.55 points, or 1.5%, at 9,561.57, wiping out more than half of its 231-point gain from the first two days of the week. It was the Dow’s fifth triple-digit move in seven sessions. The broader Standard & Poor’s 500 index dropped 17.15 points, or 1.7%, to 1,019.99.

The worst damage was in the tech sector. The Nasdaq composite index slid 46.13 points, or 3%, to 1,496.83, with losing stocks outnumbering winners by almost 2 to 1. The last time Nasdaq closed lower was Oct. 2, when it stood at 1,492.33. The index had closed as low as 1,496.86 last week before staging a rebound.

About five stocks fell for every three that rose on the New York Stock Exchange, as trading volume rose.

Meanwhile, Treasury yields had their biggest drop in four months on expectations the Federal Reserve will wait until at least the fourth quarter to raise interest rates, on worries that the economic recovery is slowing.

Bonds also benefited from a “flight to safety” by jittery investors. The yield on the benchmark 10-year Treasury note fell from 4.84% Tuesday to 4.73%--the lowest since Dec. 4.

The dollar fell to a 17-month low of 95.7 cents against the euro. A slowing economic recovery would reduce the allure of U.S. assets for foreign investors. A decline past 95.94 cents would take the dollar to its cheapest point since July 2000. The greenback also touched a two-week low against the yen.

On Wall Street, Apple tumbled $3.03, or 15%, to $17.12 after saying revenue and profit would be lower than predicted because of soft demand for its products. A similar warning, as well as prediction of a substantial operating loss, sent chip maker AMD down $1.60, or 15.5%, to $8.70. AMD rival Intel dropped $1.93 to $20.09 on word it was shuttering its Web-hosting service and would take a $100-million charge in the second quarter.

Semiconductor makers also were hurt by news of an antitrust probe into the $11.9-billion memory-chip market. The SOX index of chip stocks fell 6.7%--back to its lows of early October--as all 17 of its members fell.

In other tech woes, software maker Oracle fell 18 cents to $8.80 after reporting quarterly results in line with expectations, but reducing its outlook for the current quarter because of weak corporate spending. And Ciena fell 44 cents to $3.96 after the company said lower third-quarter revenue was possible because of the difficult telecom environment.

Among brokerage stocks, Morgan Stanley fell $1.05 to $44.15 after reporting that second-quarter profit dropped 14%, hurt by a slump in energy trading. Bear Stearns slid 26 cents to $61.69 even as the firm said earnings rose 20%.

Some stocks benefited from a Commerce Department report Tuesday showing a bigger-than-expected 11.6% increase in housing construction in May, the largest gain since July 1995. Home Depot added 5 cents to $37.65 and lumber giant Weyerhaeuser rose 26 cents to $65.

Also, trucking company Yellow, up $2.06 to $31.05, and Goodyear Tire, down 16 cents to $19.84, issued improved profit outlooks.

TRW rose 27 cents to $55.97 on word it was selling its aeronautical systems businesses to Goodrich for $1.5 billion. Goodrich lost 33 cents to $28.98. Northrop Grumman, which has been trying to buy TRW for four months, rose $2.80 to $132.50.

Market Roundup, C5-6