Tech stocks flop after morning pop

An early rally fizzles, as presidential election uncertainties continue to sap investor enthusiasm.

5 min read
An early rally fizzled Monday, as presidential election uncertainties continued to sap investor enthusiasm.

The Nasdaq composite index jumped more than 90 points in the first hour of trading but fell back to close down 23.89 at 2,880.49. The Standard & Poor's 500 index climbed 7.20 to 1,348.97, and the Dow Jones industrial average rose 75.84 to 10,546.07.

The markets "had a little euphoria early on," said Todd Clark, head of listed trading at WR Hambrecht.

About 23 stocks declined for every 18 that advanced on the Nasdaq, which generated a volume of 1.7 billion shares. The advanced/decline ratio was better on the New York Stock Exchange, with 16 stocks rising for every 13 that fell, while volume nearly reached a moderate 920 million shares.

The presidential election seemed to edge toward a decisive victory for George W. Bush, who declared himself the winner of the hotly contested election. On Sunday, Florida Secretary of State Katherine Harris certified Bush the winner with a 537-vote margin over Gore out of about 6 million votes cast in the state. If the results stand, Florida's 25 electoral votes will give Bush the presidency.

But Gore and the Democratic Party plan to appeal the result. Many Wall Street insiders say the continued uncertainty clouding the election has sucked energy from markets.

"The markets are Want election news? Get it here optimistic that Bush has won and that there will be a conclusion to this mess, but it's guarded optimism," said Peter Coolidge, senior equity trader at Braen Murray & Co. Coolidge added that concern over the high valuations in the tech sector also had a tempering effect on the rally.

Gore is scheduled to speak Monday about his plans to contest the results. "The tone of tonight's Gore speech is going to be very important for the markets," Clark said.

While most believe that the resolution of the election will bring some kind of rally, slower earnings growth for the next few quarters have seeded doubts about the strength of the market. "There are less than 30 trading days left in the year and not a lot of conviction," said Richard Peterson, a market strategist at Thomson Financial Securities Data.

Peterson also said that the tough times for securities have spilled over into the once hot initial offering market. He calculates that about 460 IPOs will launch this year, compared with 543 last year.

Even though the amount of money raised from this year's IPOs will eclipse last year's mark of $68 billion, Peterson says that the top ten highest dollar IPOs comprised 40 percent of this year's projected $78 billion.

At least one closely watched succession race came to an end Monday. General Electric named Jeffrey Immelt, the head of its medical systems division, as the replacement for retiring CEO Jack Welch when he steps down at the end of next year.

Immelt, who has been with GE for 18 years, will immediately become president- and chairman-elect, the company said in a statement. At the end of regular trading, GE closed down 25 cents at $49.13.

The CNET tech index fell 12.54 to 2,388.65. Advancers and decliners were balanced, with 52 of the 97 stocks in the index falling, 43 rising and two remaining unchanged.

Of the 18 sectors tracked by CNET Investor, server hardware companies posted the sharpest gains, rising 3 percent. Semiconductor makers were the day's largest losers, falling about 4 percent.

The volatile Philadelphia semiconductor index fell 46.60, or nearly 7 percent, to 628.08, led by chipmaker Altera, which lost $3.88, or 12 percent, to $27.31.

Lehman Brothers analyst Dan Niles cut his fourth-quarter earnings estimate on Altera to 31 cents a share from 32 cents. Niles also reduced his year 2001 estimate to $1.40 from $1.45.

Niles commented in a note released Monday that Altera has experienced a fall-off in demand during the month of November making it unlikely that the company will hit its revenue growth target for the quarter.

Other chip stocks took a hit. Analog Devices fell $6.75, or almost 11 percent, to $55.63; Cypress Semiconductor lost $3.13, or 10 percent, to $26.81; Micron Technology declined $3.75, or 9 percent, to $37.13; PMC-Sierra dropped $10.75, or 9 percent, to $102.69; and Xilinx slipped $5.81, or 11 percent, to $46.50.

Niles also reduced earnings estimates on Xilinx for the same reason. He cut fiscal year 2001 earnings to $1.28 from $1.30 and 2002 earnings to $1.72 from $1.82.

Objective Systems Integrators rose $4, or almost 30 percent, to $17.50 after Agilent Technologies announced Monday that it would buy the maker of software for telecommunications service providers for $665 million in cash, or $17.75 for each Objective Systems share. Shares of Agilent fell 44 cents to $50.50.

Gains by high-profile tech stocks helped slow the Nasdaq's slide. Qualcomm climbed $4.94 to $89.44, and Sun Microsystems jumped $3.31, or about 4 percent, to $88.19.

Software stocks made some gains. Siebel Systems climbed $6.63, or about 9 percent, to $84.44; Veritas Software gained $12.63, or about 14 percent, to $106; and Microsoft gained 75 cents to $70.69.

Shares of some Internet portal companies clawed higher. Yahoo rose $1.94 to $40.13, and Terra Networks gained $1.19 to $14.88. Meanwhile, America Online advanced $1.07 to $43.97, while merger partner Time Warner closed up $2.80 at $65.87.

Negative comments by analysts took some tech stocks down.

Broadcom, a maker of chips for cable set-top boxes, fell $19.56, or about 17 percent, to $97.56. Salomon Smith Barney analyst Clark Westmont cut the stock's 12-month price target to $200 from $300 but maintained the stock at a "buy" rating. In a research note, Westmont cited "signs of flattening orders in Broadcom's supply chain (and) inventory concerns in the digital cable sector."

The analyst also said "the December quarter is not at risk for Broadcom, and any weakness would be reflected in the guidance for the March quarter."

Shares of Internet software maker Adobe Systems fell $7.06, or 9 percent, to $68.81. The Internet software maker was downgraded to "market perform" from "buy" by Banc of America Securities.

Ariba and Commerce One took a hit after Wit SoundView downgraded the e-commerce software makers to "hold" from "buy." Ariba fell $11.44, or about 15 percent, to $67, and Commerce One dropped $3.25, or 8 percent, to $36.