Fwd: U.S. MARKETS: Nasdaq Sinks 7% Into Bear Market

[Doug Henwood]

>U.S. MARKET NEWS
>from The Wall Street Journal at WSJ.com.
>
>
>April 12, 2000
>
>Nasdaq Sinks 7% Into Bear Market as Techs Stumble
>
>By David Runk
>Interactive Edition
>
>The Nasdaq Composite Index plummeted 7.1% Wednesday as the sell-off in
>technology stocks intensified, leaving the index deeply in bear market
>territory. Blue-chip stocks were also swept up in the selling.
>
>Technology shares remained under pressure throughout the day in the wake of
>a revenue estimate downgrade for Microsoft and disappointment with some
>earnings reports. The Nasdaq composite closed down 286.26 to 3769.64, its
>second biggest decline ever in point terms and its sixth biggest drop in
>percentage terms.
>
>The Dow industrials, which was poised to record its third straight session
>of gains until the last hour of trading, closed down 161.95, or 1.5%, to
>11125.13 as gains logged in early trading evaporated.
>
>The Standard & Poor's 500-stock index fell 33.83 to 1466.76 and the New
>York Stock Exchange Composite Index dropped 7.20 to 654.00.
>
>The Dow industrials had benefited over the past two sessions as money from
>tech issues made its way into Old Economy shares. But solid declines by
>tech stalwarts Microsoft, Hewlett-Packard and Intel -- all Dow industrial
>components -- helped drag the blue-chip index into negative territory.
>
>The decline by the Nasdaq composite, its third straight day of losses, left
>it down 25.3% from its March 10 record close of 5048.62, greater than the
>20% drop that many on Wall Street use as a rule of thumb to declare a bear
>market.
>
>Peter Cardillo, senior vice president at Westfalia Investments, said he saw
>the Nasdaq composite's decline as a short-term one, not an indication that
>a protracted bear market has arrived.
>
>"I don't think this is going to be a lasting one," said Mr. Cardillo,
>although he noted the index probably isn't ready for an immediate rebound.
>"This is a correction, a steep correction, a long-needed one."
>
>Mr. Cardillo said the Nasdaq's drop follows "overboard" gains on the index
>that left tech company stocks with extremely high valuations. Recent news
>about Microsoft, such as its revenue estimate downgrade and the "findings
>of law" in the government's antitrust case, has served as a catalyst for
>the Nasdaq market's decline.
>
>Early Wednesday, Goldman Sachs analyst Rick Sherlund rattled investors when
>in a CNBC interview he said he had lowered his Microsoft revenue estimate
>for the third quarter to $5.75 billion from $5.9 billion. Mr. Sherlund
>cited slowing personal-computer sales in March for the reduction. Microsoft
>was down 4 1/2 to 79 3/8 at 4 p.m. EDT.
>
>Steven Goldman, market strategist at Weeden & Co., said volatility in the
>Nasdaq composite likely will continue as investors continue to prune some
>of the past year's gains from tech stocks. "I think the lows were seen a
>short-term basis last week," said Mr. Goldman, referring to April 4, when
>the index fell 13.6%, below 3650, before recovering to close down 1.77% for
>the day. "But there is still a road to retest and find some strength."
>
>Telecommunications, semiconductor and biotechnology issues all helped lead
>the Nasdaq composite lower Wednesday. Worries about slowing PC sales
>hammered computer-related stocks, with the Nasdaq computer index tumbling
>179.08, or 7.5%, to 2194.08.
>
>Ricky Harrington, technical analyst at Interstate Johnson Lane Securities,
>said the Nasdaq market is searching for fresh leadership -- and not
>necessarily finding it -- as tech stocks continue to decline. The market
>also is seeing a weak response to earnings from some tech companies.
>
>"The market's response to these earnings announcements has been very
>disappointing," Mr. Harrington said. "These earnings have already been
>factored into the stock prices. There has a migration of money into
>blue-chip stocks, but also out of the market."
>
>The overall market was keeping a close eye on corporate results as
>companies continue to release first-quarter earnings this week and next
>week. Investors had been trading cautiously ahead of earnings season and
>expectations were for solid earnings from tech firms.
>
>Among actively traded shares, J.P. Morgan gained 1 15/16 to 136 11/16 after
>it reported a 4.6% increase in first-quarter net income, to $3.37 a share.
>The results came in well above expectations and lifted other financial
>shares as Citigroup and Chase Manhattan posted gains.
>
>Compuware's shares tumbled 8 1/8, or 40%, to 11 15/16 after the
>business-software maker said it expected to post fiscal fourth-quarter
>earnings well below analysts' estimates. The prospect of disappointing
>earnings from Compuware was seen as hurting the overall performance of tech
>issues.
>
>Shares of E*Trade Group, higher for most of the session, were down 11/16 to
>22 3/4 at 4 p.m. EST after the company posted operating earnings that
>trounced analysts' expectations as revenue soared 152%. The Menlo Park,
>Calif., online broker posted a loss for the second quarter ended March 31
>of $23.2 million, or eight cents a diluted share.
>
>Investors also were cautious ahead of the release of key economic reports
>later this week. Thursday sees the release of March retail sales and the
>producer price index, and the consumer price index and industrial
>production figures are expected Friday.
>
>In major market action:
>
>Stocks closed lower. On the Big Board, where 1.14 billion shares traded,
>1,509 stocks advanced and 1,439 declined. On the Nasdaq Stock Market,
>volume reached 1.91 billion shares.
>
>Bonds declined. The 30-year Treasury bond was down nearly 3/4 point, or
>$7.50 for a $1,000 bond. Its yield, which moves inversely to price, rose to
>5.808%. The 10-year bond rose 1/2 point, while its yield slipped to 5.927%.
>
>The dollar was mixed. The dollar traded at 95.85 cents to the euro and
>105.80 yen to the dollar, from 95.89 cents to the euro and 107.02 yen to
>the dollar late Tuesday in New York.
>
>Write to David Runk at david.runk at wsj.com
>
>
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