Tech shares slide early, recover
Technology stocks post steep declines in early trading, and the Nasdaq composite index dips as much as 3 percent before a midday rally cuts the losses.
The Nasdaq fell by as much as 128 points early Monday, but managed to close down 5.45 at 3,355.56, while the Standard & Poor's 500 index fell 6.96 to 1,402.03.
After making early gains, the Dow Jones industrial average dropped 28.11 to close at 10,568.43 led by American Express, which lost $1.94 to $56.
The market is "likely headed lower before a strong or final low and bottom condition is reached," wrote Merrill Lynch chief market analyst Dick McCabe in a report released Monday.
The market has failed to respond to the "oversold condition" that it reached in September, he added. "This unresponsiveness, like a sick patient whose condition does not improve despite medication, is an unfavorable sign."
McCabe recommended that "short-term oriented accounts" should use any market rebound to sell shares and temporarily shift holdings into cash.
The markets also did not show much life last week, when the Nasdaq dropped 8 percent, and the S&P shed 2 percent.
According to Birinyi Associates, which tracks money flows into and out of stocks and specific sectors, stocks on the New York Stock Exchange received a net inflow of $1.7 billion last week, compared to the previous week's gain of $4.9 billion. Financial and consumer staple companies received the bulk of investor interest.
While the NYSE attracted investments, investments in tech stocks in the S&P 500 dipped by $120 million last week and $2.9 billion the prior week.
At the end of regular trading Monday, Intel closed down 89 cents at $39.06, and Microsoft dropped $1.38 to $54.19. Earlier in the trading session, Microsoft set a new 52-week low of $53 compared with a high of $119.93 over the same period.
The CNET tech index lost 19.02 to close at 2,719.82. Winners edged out losers, with 51 of the 97 stocks in the index rising, 45 falling and one remaining unchanged.
Of the 18 sectors tracked by CNET Investor, providers of services to Net companies were the day's largest gainers, climbing 3 percent. Semiconductor companies posted the sharpest drops, falling about 2 percent.
Among members of the CNET tech index, Electronic Data Systems gained ground.
The computer-services company announced that it won a U.S. Navy contract worth almost $7 billion over eight years. Its shares rose $4, or about 10 percent, to $44.63.
Shares of e-commerce software makers showed signs of life. BroadVision climbed $3.69, or 20 percent, to $21.94, and Vignette gained $7.44, or nearly 40 percent, to $26.13. Siebel Systems rose $7.75 to $100.19. CNET Networks, the publisher of News.com, owns a stake in Vignette.
The markets were not as kind to e-commerce companies: Amazon.com fell $1.50 to $30.06. eBay closed up $1.50 to $58.28, but traded as low as $53.56 early in the day.
Yahoo dipped to a 52-week low of $75.50 in early trading but rebounded to $85.75, a gain of $4.50 from Friday's close.
A report released by market-research company Dataquest said the chip industry will continue to post steady growth before slowing in 2002.
In its five-year outlook, Dataquest predicts that sales will grow 36.9 percent this year to $231.6 billion and another 27.5 percent in 2001, up from the company's previous forecast of 31.3 percent growth in 2000 and 26.9 percent growth for 2001.
The revision failed to boost the chip sector. The Philadelphia semiconductor index lost 13.43, or about 2 percent, to 785.96 led by chip designer Rambus, which slumped $8.63, or nearly 11 percent, to $71.38.
Other chip companies took a hit. Analog Devices fell $6 to $78; PMC-Sierra dropped $9 to $190.06; Altera lost $3.44 to $40.88; and Xilinx stumbled $2.81 to $79.13.
Stamps.com fell 13 cents to $3.50 after the company, which offers online shipping and postage services, announced that its president, chief financial officer and comptroller have stepped down.