today with three new profit warnings, including an ugly one that came out of left field. Add in a surprising spike in wholesale inflation and plunging consumer confidence and you've got good reasons for traders to hide under the covers.
At 12 p.m. ET, the Nasdaq Composite Index was off 112 points or 4.4%, after rising 2.5% yesterday. The Dow Jones Industrial Average, which is less tied to tech, fell a relatively mild 79 points, or 0.73%. The S&P 500 fell 22, or 1.6%. It's all a far cry the temporary optimism that pervaded the market yesterday after fiber-optic player Ciena (CIEN) and telecom company Global Crossing (GX) surprised the market with their quarterly numbers. As techs tanked today, defensive stocks were back in favor, including energy, utilties and food. Some cyclical sectors gained too, such as banks and retailers.
This flip-flop market, in which techs are in one day and out the next, has persisted for weeks as traders sell after bad news, then buy back as they bet that the economy is bound to turn higher later in the year. However, as the bleak headlines pile up, doubts are growing on whether that will happen.
Early signs of trouble showed late yesterday as the rally weakened near the close. Investors took money out, concerned that Dell Computer (DELL) and competitor Hewlett-Packard (HWP) would guide 2001 profits southward during their after-the-bell earnings reports.
The boxmakers did just that. Dell missed lowered fourth-quarter profit predictions, and said it would miss numbers in the first quarter and cut 4% of its work force. Hewlett met lowered predictions but said a return to double-digit revenue growth won't happen this year.
However, these tremors were overwhelmed by a quake from Canada. Telecommunications-equipment maker Nortel Networks (NT) issued a surprise warning, saying it would lose money in the first quarter and cutting in half its 2001 forecast for revenue and earnings growth. "We now expect the U.S. market slowdown to continue well into the fourth quarter of 2001," said Chief Executive John Roth. The Canadian company said its customers, telecom-services providers, are trimming back expansion plans more than expected; and it will slash its work force by 10,000. Nortel's share plunged 33%. The news rippled through the networking sector, hitting the likes of fiber-optic player JDS Uniphase (JDSU), communications-chip maker Applied Micro Circuits (AMCC), and electronics-component maker Celestica (CLS).
Nortel competitor, Lucent Technologies (LU), added to the malaise with new financial problems. The Wall Street Journal reported the company is having trouble lining up $6.5 billion in lending. Banks and other lenders are skittish about loaning the company money considering uncertainty surrounding its finances, the paper said. Lucent's business has been eroding and it's under investigation by the government for revenue reporting problems. The stock fell 7%.
Yet, for all the bad news, the sell-off could have been a lot worse, said one of the Street's more bearish pundits.
At 12 p.m. ET, the Nasdaq Composite Index was off 112 points or 4.4%, after rising 2.5% yesterday. The Dow Jones Industrial Average, which is less tied to tech, fell a relatively mild 79 points, or 0.73%. The S&P 500 fell 22, or 1.6%. It's all a far cry the temporary optimism that pervaded the market yesterday after fiber-optic player Ciena (CIEN) and telecom company Global Crossing (GX) surprised the market with their quarterly numbers. As techs tanked today, defensive stocks were back in favor, including energy, utilties and food. Some cyclical sectors gained too, such as banks and retailers.
This flip-flop market, in which techs are in one day and out the next, has persisted for weeks as traders sell after bad news, then buy back as they bet that the economy is bound to turn higher later in the year. However, as the bleak headlines pile up, doubts are growing on whether that will happen.
Early signs of trouble showed late yesterday as the rally weakened near the close. Investors took money out, concerned that Dell Computer (DELL) and competitor Hewlett-Packard (HWP) would guide 2001 profits southward during their after-the-bell earnings reports.
The boxmakers did just that. Dell missed lowered fourth-quarter profit predictions, and said it would miss numbers in the first quarter and cut 4% of its work force. Hewlett met lowered predictions but said a return to double-digit revenue growth won't happen this year.
However, these tremors were overwhelmed by a quake from Canada. Telecommunications-equipment maker Nortel Networks (NT) issued a surprise warning, saying it would lose money in the first quarter and cutting in half its 2001 forecast for revenue and earnings growth. "We now expect the U.S. market slowdown to continue well into the fourth quarter of 2001," said Chief Executive John Roth. The Canadian company said its customers, telecom-services providers, are trimming back expansion plans more than expected; and it will slash its work force by 10,000. Nortel's share plunged 33%. The news rippled through the networking sector, hitting the likes of fiber-optic player JDS Uniphase (JDSU), communications-chip maker Applied Micro Circuits (AMCC), and electronics-component maker Celestica (CLS).
Nortel competitor, Lucent Technologies (LU), added to the malaise with new financial problems. The Wall Street Journal reported the company is having trouble lining up $6.5 billion in lending. Banks and other lenders are skittish about loaning the company money considering uncertainty surrounding its finances, the paper said. Lucent's business has been eroding and it's under investigation by the government for revenue reporting problems. The stock fell 7%.
Yet, for all the bad news, the sell-off could have been a lot worse, said one of the Street's more bearish pundits.
