Intel's unexpected warning of a drop in revenues sent the markets tumbling in Friday trading. Both the Dow industrials and the Nasdaq posted triple digit losses.
At market close, tumbling tech shares drove the Dow down
219.94 at 10,638.31, effectively killing the index's five-day
Broader market indicators also plunged on Intel's news. The
Nasdaq composite index plummeted 112.41 to 2,056.32, while the
Standard & Poor's 500 index dove 31.14 to 1,233.60.
While most of the day's losses on Wall Street came from the tech
sector, financial stocks also contributed to the Dow's slide.
Financial stocks skidded after Prudential Securities and Salomon
Smith Barney downgraded their ratings on several stocks, including
Bank One, down $1.01 at $35.88. The Dow's Citigroup lost $1.11 to
trade at $49.64.
Declining issues outnumbered advancers nearly 2 to 1 on the New
York Stock Exchange where volume was 707.19 million shares,
compared with 722.13 million at the same point Thursday.
The Russell 2000 index, which measures the performance of
smaller companies stocks, fell 7.71 to 473.78.
Economic Numbers Exacerbate Market Woes
The market was also hurt by the Labor Department's report that
the nation's employers created 135,000 jobs in February, well ahead
of analysts' forecasts of about 75,000. The data, indicating
strength in the economy, might relieve some of the pressure on the
Federal Reserve to lower interest rates as a way of stimulating
Analysts said the market now expects the Fed to lower rates by a
quarter point, or perhaps not at all, when it meets March 20. Wall
Street had been anticipating a half-point reduction.
Tech Industry Warnings Pour in
Intel, a Dow stock, fell $3.38 to $29.88. The company announced
late Thursday that first-quarter sales will miss expectations by 25
percent and it will cut 5,000 jobs, largely through attrition.
"That's a pretty big hit to revenues. People aren't happy,"
said Dan Ascani, president and research director for Global Market
Strategists in Gainesville, Ga.
In recent weeks, analysts had been encouraged when reduced
outlooks particularly by big-name companies failed to bring the
market much lower. Wall Street figured that meant the battered
sector was ready to rebound.
"Now you have a bellwether like Intel with poor projections.
The market doesn't feel things are getting any better or that the
trend in earnings and revenues is changing," Ascani said.
Other tech losers included Dow stocks like Microsoft, falling
$2.75 to $56.50 after being downgraded by Merrill Lynch, as well.
Losses also extended to Intel customers like Dell Computer, down
$2.44 at $23.69, and other chip makers including Applied Micro
Devices, down $2.54 at $23.46.
Nasdaq Gets Pummelled
The latest tech sell-off came as the Nasdaq approached the year
anniversary of its record high close 5,048.62 set on March 10,
The composite has slid about 59 percent from that high, and many
of its stocks are trading at similar or even lower levels. Intel,
for example, is trading at about 75 percent below its March 10
closing price of $120.19.
While recent economic data such as Friday's labor report
indicate the economy is picking up, analysts say it's going to take
longer for techs to fare better. Companies like Intel first must
unload burgeoning inventories, incurring more losses as they are
forced to discount their merchandise.
However, Moore doesn't expect tech stocks to suffer much longer.
"With continued (increasing) strength in the economy, and the
jobs data is an indication of that, I think there is a good chance
of recovery in the coming weeks," Moore said.
Sectors outside of technology, such as car makers and retailers,
also have been battling excess inventory. General Motors, in fact,
plans to idle two North American assembly plants next week, briefly
laying off 4,900 workers in an effort to reduce vehicle
inventories. GM inched up 17 cents at $58.62 on Friday.
The Associated Press contributed to this report