Another day, another downturn for tech stocks
Earnings concerns, downgrades in the chip sector, and worries about reduced Internet ad spending conspire to punish technology shares.
The Nasdaq composite index fell 76.32, or 2 percent, to 3,213.96, and the Standard & Poor's 500 index dropped 24.65, or nearly 2 percent, to 1,349.97.
The Dow Jones industrial average fell 149.09 to close at 10,089.71 led by Disney, which lost $2.81 to $35.44.
Tuesday's decline left the Dow below the 10,100 level for the first time since March 7.
Earnings news in the chip sector helped drag the markets down. Chip equipment maker Teradyne posted third-quarter earnings that met analysts' expectations, but the company also predicted slower fourth-quarter sales. Its shares fell to $24.13, a drop of almost 30 percent, or $10.31.
"Forget the numbers now, people are wondering about the prognosis for the patient going forward," said Tony Cecin, head of trading at U.S. Bancorp Piper Jaffray.
"Even in cases when companies make or break third-quarter numbers, people are going to seize on the forecast for the next quarter," he said.
Micron Technology shares were downgraded to "attractive" from "buy" by PaineWebber, which also lowered the stock's 12-month price target to $50 from $110 per share. Morgan Stanley Dean Witter lowered its rating on the chipmaker to "outperform" from "strong buy."
At the end of regular trading, Micron shares fell $4.69, or about 14 percent, to $29. The decline depressed the Philadelphia semiconductor index, which dived 66.41, or 9 percent, to 648.09. The index dipped below 650 in late December of 1999.
Other chip stocks took a hit Tuesday. KLA-Tencor fell $3.38, or nearly 11 percent, to $28.06; Applied Materials shaved off $4.25 to $44.50; and Advanced Micro Devices lost $2, or about 10 percent, to $18.38.
All of the 18 sectors tracked by CNET Investor headed south. Internet content companies led the way down, falling 13 percent, followed by semiconductor equipment makers, which dropped nearly 10 percent.
On the economic front, industrial production at the nation's factories, mines and utilities slowed 0.2 percent in September compared to the previous month's 0.4 percent rise. Many analysts were expecting a decline of 0.1 percent.
Total industrial production for the third quarter rose at an annual rate of 2.8 percent, the slowest pace since a 2 percent rise in the first quarter of 1999--adding to the growing number of reports that indicate the economy is slowing. The Federal Reserve has raised interest rates six times since June of 1999 in hopes of curtailing overactive economic growth, which can lead to inflation.
The CNET tech index lost 78.77 to close at 2,530.09. Losers far outnumbered winners, with 82 of the 97 stocks in the index falling, 14 rising and one remaining unchanged.
Among members of the CNET tech index, Internet stocks posted losses on continued concerns about a drop in ad spending.
E-tailer Amazon.com dropped $2.38, or about 10 percent, to $21.94, and eBay lost $6.88, or about 12 percent, to $52.75. Internet portal Yahoo fell $6.31, or 11 percent, to $48.94. America Online stumbled $9.01, or 17 percent, to $43.60, while its proposed merger partner Time Warner fell $12.24, or nearly 16 percent, to $65.56.
Shares of Adobe Systems fell $8.88 to $132.94 after PaineWebber cut the stock to "attractive" from "buy." Analyst Ben Reitzes said in a report that while the desktop publishing software maker "remains the elite stock" in his group, its price has risen too high. Adobe has nearly doubled this year.
Reitzes also said that weakness in sales in the high-end color printer market, slow PC sales, and a downturn in overall technology spending played a role in the downgrade.
On the bright side, BroadVision managed to buck the downward trend, rising $2.25, or 9 percent, to $26.06. The maker of software used for Internet commerce will be included in the S&P 500 on Monday. Shares of companies joining the index typically rise because fund managers who try to mimic the benchmark's performance must buy the shares.
Among large tech companies, Microsoft inched up 6 cents to $50.44; Intel rose 50 cents to $36.19; and Cisco Systems inched up 6 cents to $54.56.
After the closing bell, Intel reported third-quarter earnings that slightly exceeded analysts' lowered expectations.