Techs mull macroeconomic picture
Technology stocks and the broader markets slump as investors digest more evidence of a weak economy from the Federal Reserve's "beige book" report.
The Dow Jones industrial average was off 160.74 to 9,711.86, and the Nasdaq composite index lost 48 to 1,887.97. CNET's technology indexes were lower.
The markets have been on a strong run since mid-September, having recovered the ground lost since the Sept. 11 tragedy. But a drop in consumer confidence Tuesday began to eat away at investors' belief that the gains are merited.
More doubts about the U.S. economic picture were raised with the release of the Federal Reserve's beige book, which describes regional economic activity. The report indicated that economic activity generally remained soft in October and the first half of November, and that the slowdown deepened in most regions.
The Fed said consumer spending was mixed. Auto sales rose to "exceptional levels,'' but purchases of other goods were "spotty.''
The beige book report will be used when Fed policy-makers assess whether to cut interest rates again at their Dec. 11 meeting. Fed officials suggested Tuesday that they are uncertain when the economy will hit its "trough," or bottom, indicating that further weakness may be ahead. But the Fed also indicated that already low interest rates won't prevent it from slashing rates again.
After a lowering of interest rates by 1.5 percentage points since Sept. 11, the federal funds rate is at 2 percent, its lowest level in decades.
"Does this mean that the Fed should 'keep its powder dry,' as some have argued, holding back on further easing in case the downturn turns out to be more serious or in case there are additional adverse shocks?" said Fed Governor Laurence H. Meyer in a speech to the National Association of Business Economics in St. Louis, Mo. "I believe such a strategy would be misguided--indeed, the reverse of what would be appropriate."
In company news, Dell Computer CEO Michael Dell reaffirmed forecasts that fourth-quarter earnings will be steady with the third quarter's, while sales will be slightly higher. Dell spoke at the Credit Suisse First Boston Technology Conference in Scottsdale, Ariz., which also produced some news for other tech companies. Shares lost 49 cents to $25.99.
Texas Instruments also confirmed forecasts at the conference. The chipmaker said it was maintaining projections and added that it is starting to see signs of stabilization. CEO Tom Engibous said he expects fourth-quarter revenues to be down about 10 percent from the third quarter and that he sees the company reporting a fourth-quarter loss of about 9 cents per share. TI shares lost $1.55, or 5 percent, to $31.03.
CNET's Storage Index dropped more than 6 percent, with Brocade Communications being the most noteworthy decliner. Brocade fell $3.02 to $28.82 ahead of its fiscal fourth-quarter report, scheduled for release after market close Wednesday.
Among other actively traded shares, Cisco Systems lost 82 cents to $18.88, Sun Microsystems was off 31 cents to $13.16, Intel fell 55 cents to $31.76, Oracle fell 30 cents to $14.12, and Microsoft shed 94 cents to $62.80.
AOL Time Warner lost $1.26 to $35.50, Yahoo fell $1.19 to $16.21, and Amazon.com rose 11 cents to $11.59.
Staff and Reuters contributed to this report.