Wall Street is bracing for the Nasdaq to turn in its worst yearly performance ever, with a 42.7 percent drop since January and a 54.6 percent drop since its all-time high March 10.
The Nasdaq composite index closed down 178.94, or 7 percent, to 2,332.77, setting a new 52-week low. Wall Street is bracing for the Nasdaq to turn in its worst yearly performance ever, with a 42.7 percent drop since January and a 54.6 percent drop since its all-time high March 10.
The Standard & Poor's 500 index was off 40.86, or 3 percent, to 1,264.74. The Dow Jones industrial average fell 265.44, or about 3 percent, to 10,318.93.
"The markets have a lot of negative news right now and no reason for a rebound," said Iyako Tsuboya, an associate vice president and trader at Daiwa Securities America.
The decline was the seventh highest point slide in the Nasdaq's history. More than 2.84 billion shares exchanged hands, the index's second largest volume day ever. Four stocks fell for every one that gained.
The last time the Nasdaq closed below 2,400 was in June of last year. The S&P last finished below 1,300 in October 1999.
Cisco Systems led the plummet, falling $5.25, or more than 12 percent, to $36.50, setting a new 52-week low earlier in the day at $35.69 compared with a high of $82 over the same time frame.
Merrill Lynch analyst Michael Ching cut his intermediate-term rating on the network equipment maker to "accumulate" from "buy." Ching said a slowdown in corporate spending on information technology equipment is spreading.
"An economic slowdown suggested by recent indicators will prompt investors to become increasingly concerned about a deceleration in corporate IT spending in general," he wrote in a note.
Other tech bellwethers bombed. Microsoft fell $3.31 to $41.50; Intel dipped $1.50 to $31.94; Oracle lost $2.13 to $28.50; and JDS Uniphase declined $5.75 to $46.
Microsoft set a new 52-week low of $41.38 in midday trading. Dell Computer, Amazon.com, America Online, CMGI, 3Com, eBay, and CNET Networks, the publisher of News.com, were also among the many stocks that set new 52-week lows Wednesday.
Wall Street, which entered the quarter with relatively low expectations, is now bracing for even grimmer fourth-quarter earnings.
Analysts expect earnings for companies in the S&P 500 to grow 6.5 percent from a year ago, according to First Call/Thomson Financial. On Oct. 1, Wall Street expected fourth-quarter earnings to increase by 14.4 percent.
Earnings for the 81 tech companies in the S&P 500 are expected to grow by only 11 percent compared with the fourth quarter of last year. Previously, fourth-quarter earnings had been expected to grow by 29 percent.
"Companies are using this quarter as the kitchen sink quarter," said Tracy Eichler, an investment strategist at PaineWebber. Companies are thinking, "Let's get all the bad news out, (as well as) the restructuring charges and the write-offs."
Eichler thinks that the so-called Regulation FD might have contributed to the recent volatility.
Regulation "fair disclosure," enacted earlier this year by the Securities and Exchange Commission, prohibits the disclosure of sensitive financial information to favored Wall Street professionals. Companies must now announce market-sensitive information publicly. The rule was intended to level the playing field in how information is disseminated and eliminate the advantage that insiders have traditionally held over individual investors.
"Regulation FD puts much more information into the markets, but not as much insight," Eichler said. "Investors are being bombarded with information, but where's the insight behind it?"
An earnings warning from Foundry Networks further heightened Wall Street's concern over spending in the tech sector.
"The whole tech sector is linked up," Tsuboya said. "If negative earnings happen to one part, the others are affected." As an example, Tsuboya noted that if computer makers reported slow business, then other sectors like chipmakers and component suppliers would be more likely to face a slowdown.
Excluding noncash charges, Foundry expects earnings of 11 cents to 14 cents a share. Financial analysts had expected Foundry to report earnings of 24 cents a share, the consensus estimate of 24 analysts surveyed by First Call/Thomson Financial.
The network-equipment maker also expects fourth-quarter revenue of between $100 million and $110 million, far below the $128 million that some analysts had predicted.
Foundry fell $17.63, or about 58 percent, to $13, while rival Extreme Networks lost $17.44, or about 36 percent, to $31.13.
CNET tech index battered
The CNET tech index fell 150.52 to 1,928.38. Decliners steamrollered advancers, with 95 of the 97 stocks in the index falling and just two rising.
All of the 18 sectors tracked by CNET Investor were in the red. Computer data storage makers, network equipment makers, and providers of services to Internet companies paced the plunge, falling about 10 percent each.
Other companies were also swept away in the undertow.
Jabil Circuit fell short of Wall Street estimates in an earnings announcement on Tuesday and hit a new 52-week low of $18.63 on Wednesday morning. The contract equipment manufacturer for the PC sector reported fiscal first-quarter earnings Tuesday of $47.7 million, or 24 cents a share, on sales of $1.1 billion.
Wall Street had expected earnings of 26 cents a share, according to analysts polled by First Call. Jabil's sales were roughly in line with expectations for the quarter ended Nov. 30. The company's shares at the close of regular trading fell $6.81, or 24 percent, to $21.
A fall-off in demand also hit Vishay Intertechnology, which fell $3.75, or 20 percent, to $14.88. The maker of electronic components said fourth-quarter earnings will be 10 percent to 20 percent lower than consensus expectations of $1.20 a share as surveyed by First Call. The company also said that sales will be 5 percent to 7 percent lower than third-quarter sales of $670 million.
Wall Street expressed more skepticism Wednesday over the fortunes of the PC makers. Merrill Lynch analyst Thomas Kraemer lowered his near-term ratings to "neutral" from "accumulate" on IBM and Hewlett-Packard.
Kraemer said spending concerns were part of the reason for the action. "There has been a clear downward swing in (information technology) spending intent over the last month," he wrote in a report, adding that in one month, the number of companies surveyed that plan to increase their IT spending over the next year dropped to 56 percent from 78 percent.
IBM fell $4.13 to $86, and HP fell 88 cents to $20.44.
Chip stocks also took a beating. The Philadelphia semiconductor index dropped 37.35, or 6 percent, to 539.57, led by chipset designer Rambus, which lost $6.31, or 15 percent, to $35.56.