Nasdaq tumbles again, loses 7 percent
By Sam Ames, Staff Writer
April 12, 2000
Sparked by an analyst's negative comments about Microsoft, tech stocks were pounded again today as the Nasdaq composite index recorded its sixth-biggest decline.
Dragged down by Microsoft this morning, the Nasdaq's descent picked up speed as the day wore on. When the dust settled, the tech-heavy index was off 286.39, or 7.1 percent, to 3,769.51. The damage spread to such tech bellwethers as Cisco Systems, Intel and Sun Microsystems.
With today's decline, the Nasdaq has lost 25 percent of its value since it reached a record high barely one month ago. When it peaked on March 10, the Nasdaq was sitting on a gain of 24 percent for the year. It has now lost 7.4 percent in 2000. Today's plunge ranks as the second-largest point loss and the sixth-largest decline in percentage terms.
The Dow Jones industrial average appeared to be benefiting from the Nasdaq's malaise, as investors diverted money to the more conservative, "old economy" stocks that comprise the index. Throughout the day the Dow was in positive territory, but the pessimism eventually enveloped it, sending it down 161.95, or 1.4 percent, to 11,125.13.
Today's trouble started when Goldman Sachs lowered its third-quarter revenue estimates for Microsoft, citing reduced demand for personal computers. In addition, Justice Department officials would not rule out a breakup of the company to settle its antitrust case against the software giant.
Microsoft shares fell $4.50 to $79.38 on volume of 76.5 million shares, more than twice the daily average, making it the second-most actively traded stock on the Nasdaq Stock Market behind Cisco. Microsoft shares have plunged 25 percent this month and are down 32 percent so far this year.
"Folks are saying 'Wait a minute--if Microsoft isn't going to be able to exceed expectations, we'll stay on the sidelines'" and refrain from buying technology shares, said Michael Manns, who holds the software giant's shares as senior portfolio manager at American Express Financial Advisors.
Among other tech heavyweights that were caught in the downdraft, Cisco lost $5 to $65, Hewlett-Packard shed $11.31 to $134.50, and Intel fell $8.88 to $121.88.
The Standard & Poor's 500 index fell 33.42, or 2 percent, to 1,467.17; the CNET tech index lost 194.25 to 2,963.74. Among the 98 stocks tracked by the index, losers outnumbered winners 93 to five.
Of the 18 sectors tracked, Internet services companies posted the sharpest decline, falling about 10 percent.
Compuware lost $8.13, or 40 percent, to $11.94 after the company warned that fourth-quarter earnings will not meet Wall Street expectations.
Even analyst support could not stem losses by many stocks. Analysts reiterated "strong buy" ratings on DoubleClick, Conexant Systems and Level 3 Communications, yet all three posted significant losses.
DoubleClick fell $6.19, or 8 percent, to $70.38; Conexant fell $9.25, or 13 percent, to $62; and Level 3 dropped $12.56, or 15 percent, to $69.31.
Telecom stocks, however, managed to post small gains.
Cox Communications gained 25 cents to $46.19, SBC Communications rose 44 cents to $47.69, and Bell Atlantic inched up 31 cents to $64.38. Nortel Networks fell $13, or 11 percent, to $103.75. The company signed a $500 million deal with Verizon, the company that was created from the merger of Bell Atlantic and Vodafone.
The Philadelphia semiconductor index fell 94.21, or 8 percent, to 1,037.70, led by chip designer Rambus, which lost $32.19, or 13 percent, to $213.81.
Shares of Rambus, Advanced Micro Devices and Redback Networks may cause further swings on the markets tomorrow. The technology companies released quarterly earnings today after the markets closed.
"There was constant selling pressure throughout the day, so every time the market tried to rally there were more shares around waiting to sell," said Tony Cecin, head of equity trading at U.S. Bancorp Piper Jaffray. "I feel that the Nasdaq will test the lows established during last week's trading lows.
"Tomorrow will be a reasonably significant day," he added. "In my opinion, the market has to show the ability to rally, or we're probably looking at levels between 3,000 to 3,500."
Bloomberg News contributed to this report.
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