Stocks slumped on Wednesday as
disappointing results from market leader Dell Computer Corp.
fueled concern that the long-running bull market in technology
stocks might be over.
The Dow Jones industrial average ended down 101.56 points,
or 1 percent, at 9,195.47.
In the broader market, declining issues beat advances 1,955
to 1,062 on active volume of 727 million shares on the New York
The technology-heavy NASDAQ composite index plunged 64.96
points, or 2.8 percent, to 2,248.91.
The NASDAQ index, which has been on a rollercoaster ride
since it peaked at 2,510.09 on Feb. 1, is now down 10.4 percent
from its high.
"The concern about Dell really leads to concerns about a
slowdown in corporate America," said Mara Glassel, vice
president of Prudential Securities Equity Focus Group. "If
Dell, which is a real bellwether, can't manage their revenue
growth, how can others?"
Dell Computer, the world's biggest direct seller of personal
computers, reported late on Tuesday earnings that were in line
with Wall Street forecasts. But Dell said revenue growth was up
38 percent, well below the growth of about 56 percent in the
previous eight quarters.
Dell, which ended with a loss of 7 3/16 at 81 9/16 on huge
volume of more than 112 million trades, had been among the
best-performing stocks in the last 12 months. A year ago, Dell
was at $27.81 and hit a record of $110 early this month.
Hewlett-Packard Co., the No. 3 computer maker, was the
biggest drag on the Dow, falling 5 1/8 to 68 1/8 after it also
reported weak sales growth.
Meanwhile, momentum investors those short-term traders
who chase hot stocks higher and sometimes send cold issues lower
were struggling to find replacements for the tech sector,
which appears to have run out of upside potential.
"In my opinion, the momentum players are moving out of the
market, and there is not a lot of activity out there," said
Peter Coolidge, co-director of institutional trading at Brean
Murray Foster. "We're still sort of in a volatile period."
Some strategists reckoned that technology issues will remain
the favored group.
Barry Hyman, market strategist at Ehrenkrantz, King &
Nussbaum, said that when momentum traders come off the
sidelines, they are likely to head straight back into the
"Without clear leadership right now, they basically search
for the hot stock of the day. When all the dust settles you will
see them stick within technology," he said. "They might even
look for some re-entry point in Dell."
Analysts said, though, that rich valuations on many
technology stocks has made investors question how high they can
"The leading tech stocks were priced for perfection and
there is no margin for error," said Alan Skrainka, chief market
strategist at Edward Jones.
Among other stocks in the news, Applied Materials Inc. gave
up an early gain to end 1/4 lower at 67 5/8, dragged down by the
overall bearish mood on Wall Street. The company's earnings beat
Wall Street's expectations and it also forecast that the chip
equipment industry is recovering from its long slump.
Another victim was upscale retailer Abercrombie & Fitch,
which ended down 1 7/8 at 74 3/8, despite surprisingly strong
Microsoft Corp. dropped 6 1/4 to 150, Sun Microsystems fell
6 6/16 to 94 1/16 and bellwether chip stock Intel Corp.
was down 1 3/4 to 124-5/8. Cisco Systems Inc. shrank 3 15/16 to
Geoworks Corp. rose 1 7/8 to 5 1/4 on news that the online
retailer Amazon.com Inc. will buy a 7 percent stake in Geoworks.
Amazon was up off 5 1/8 at 93 1/2.
Northwest Equity Corp. jumped 3 3/4 to 22 1/2 after the
holding company for Northwest Savings Bank said it had agreed to
be acquired by a private financial services firm at $24 a share.
Public Service Co. of North Carolina Inc. rose 6 15/16 to
29 7/16 after Scana Corp. said it will buy PSNC for $900
million. Scana was off 3/4 at 26.
The Standard & Poor's composite index of 500 stocks
fell 17.84 points to 1,224.03. The American Stock Exchange was
off 7.19 at 688.65.
The NYSE Composite index of all listed common stocks fell
6.38 to 580.35. The average share was down 48 cents.
The Wilshire Associates Equity Index the market value of
NYSE, American and NASDAQ issues was 11,146.586 down 161.932
or 1.43 percent.