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Archive for Friday, December 1, 2000

Wall St. plummets

Gateway warning triggers tech selloff

December 1, 2000

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— Wall Street recoiled Thursday from fears that worse may be yet to come for earnings and the economy, with the battered Nasdaq composite index sinking at one point to more than 50 percent off its record high close.

The tailspin, triggered by PC maker Gateway's warning of disappointing holiday sales, also dragged the Dow Jones industrials down more than 300 points before a final-hour rebound cut losses.

Traders on the floor of the New York Stock Exchange execute orders
as Wall Street struggles through weak earnings reports. The Dow
closed down 2 percent, or 214.62, at 10,414.49 on Thursday. It fell
more than 335 points in afternoon trading.

Traders on the floor of the New York Stock Exchange execute orders as Wall Street struggles through weak earnings reports. The Dow closed down 2 percent, or 214.62, at 10,414.49 on Thursday. It fell more than 335 points in afternoon trading.

It was the heaviest trading day ever for the New York Stock Exchange and the second-heaviest trading day for the Nasdaq Stock Market.

"The financial markets today are sending a strong signal that worries about the economy and earnings are intensifying ... (and) that we may be headed toward a recession or hard landing," said Hugh Johnson, a chief investment officer at First Albany Corp. "The good news is that stocks are getting down to levels that are arguably fairly valued."

The drop continued a slide in technology companies that began after Labor Day, when it first appeared that the volatile sector would perform poorly in a slowing economy. Thursday's selling, which spilled over to the rest of the market, followed Gateway's announcement late Wednesday that its holiday sales were weaker than expected.

The market's worries were compounded by a Commerce Department report showing Americans' personal income slipped 0.2 percent in October, the first decline in nearly two years. The report also said consumer spending rose by the smallest amount in six months.

The Nasdaq closed down 109.00 at 2,597.93, a 4 percent loss. Early in the afternoon, the index fell as low as 2,523.04 about half its March 10 closing record of 5,048.62.

The Nasdaq, which has fallen in nine of the past 10 sessions, is trading at its lowest levels since early August 1999. It also lost 23 percent of its value during November.

The Dow closed down 2 percent or 214.62 at 10,414.49, after falling more than 335 points in afternoon trading. The broader Standard & Poor's 500 index fell 26.96 to 1,314.95.

Gateway fell $1.30 to $19, giving it a loss of nearly 39 percent in two days. The stock, which a year ago was trading at more than $80 per share, also was downgraded by several analysts.

The selloff quickly spread to other computer-related stocks on concerns that Gateway's warning reflected industrywide problems. Rival computer maker Dell fell $2.56 to $19.25.

Chipmakers, which supply the PC industry, also dropped, led by Intel, down $4.69 at $38.06. Microsoft was down $7.69 at $57.38. Intel and Microsoft are Dow components, and their declines helped pull the index lower.

Thursday's decline repeated what is becoming a familiar pattern for Wall Street, in which a high-profile company like Gateway or, in recent months, Apple Computer or Intel has warned of disappointing results and set off waves of intense selling. These same companies helped feed Wall Street's stellar gains of the past year; now they are perceived as the most vulnerable in a slowing economy.

But not all tech stocks suffered. Oracle climbed $3.63 to $26.50 and, boosted by a late spending spree, Nortel Networks rose $2.75 to $37.75.

"Growth rates and earnings are slowing, but technology and telecom stocks are still expected to grow faster than the overall market," said Brian Belski, a fundamental market strategist with US Bancorp Piper Jaffray.




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