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Wall Street takes a hit

Stocks skid to their lowest levels in two months on fears that Asia's financial problems will eat away at U.S. corporate earnings.

Asian economic fears hit Wall Street--take two.

It has been seven months since the bull market that just won't quit was jolted by both economic uncertainty overseas and what Alan Greenspan has called "irrational exuberance."

Last October, the Dow Jones Industrial Average went from 8,200 to a low of 6,933 in 20 days as bears gloated.

Today, for the second day in a row, stocks were weighed down in trading over renewed fears about the stability of the Asian economy and its potential impact on American companies.

The Dow lost as much as 143 points in early trading today, to 8,820.74, while the Nasdaq was off 35 points, to 1,742.87. Both indices recovered somewhat later in the day, with the Dow closing at 8,936.57, down 27.16, and the Nasdaq closing up three points, at 1781.10. Asian markets were hurt overnight, as the sell-off on Wall Street added to the downward spiral in which one bad day for the U.S. markets hurts the Asian markets, which in turn hurts U.S. stocks again.

Dell Computer, Microsoft, and Intel were the three most actively traded stocks on the Nasdaq. WorldCom, Cisco, Netscape Communications, Applied Material, Ascend Communications, and Infoseek also were among the most heavily traded stocks on that exchange.

"There is concern about Southeast Asia, but that is nothing new," said Ken Pearlman, an analyst at Oppenheimer. "Suharto is gone, and that should be a positive."

"But a lot of this [downward movement in the markets] happens to be momentum," he added. "People complain that the markets are too high, and no one wants to be the last one getting out. Everyone knows that their stocks are expensive."

The Hang Seng Index fell nearly 500 points, or 5.26 percent, to close below 9,000 on fears of a recession. Stocks in Tokyo dropped 1.4 percent, while the Indonesian and Thailand markets lost 4 percent.

The slide took place against the background of renewed social unrest in Asia, as thousands of workers in South Korea began a two-day strike today to protest soaring unemployment and the prospect of mass layoffs.

"The worldwide sell-off was the catalyst--the big corrections in Russia, Brazil, Mexico, and Hong Kong," said Scott Bleier, chief investment strategist at New York City-based Prime Charter.

"[Global markets] are all worried about how bad Asia is really going to be," he added. "There continues to be worldwide instability."

In addition to the overseas turmoil, technology stocks have been hit by a sharp pullback in business in the semiconductor sector, said Pearlman.

Semiconductor revenue is down significantly, and people are realizing that it is more of a first-half phenomenon, he said.

For example, when Intel reported its most recent quarterly results in April--posting revenues of $6 billion and earnings of $1.3 billion, or 72 cents a share--it saw a significant decline in profitability from its last quarter and from the year-ago period.

At the time, the chip giant also announced that close to 3,000 employees would be laid off--largely through attrition from its workforce of some 65,000--due to lower-than-expected demand for computer chips.

He explained that the chip industry was not expected to show improvements until 1999, but that investors had stopped looking at the long term and instead were focusing on the here-and-now, in which the outlook is still pretty negative.

The chip industry is not an island, either, he added. Because it is connected to so many other businesses, such as chip components, personal computers, and consumer electronics, when any part of the equation is on the downside, all parts are affected.

Pearlman noted that chip shipments are down about 18 percent since November, But, he predicted, as the second half of the year gets underway, companies will have to buy more semiconductors in order to replenish inventories, providing a reason to be hopeful.

"There is good reason to believe that we'll have an upturn [in the second half], but it will just be seasonal," rather than the result of a technology upgrade, Pearlman said. "But stocks have done well in the face of lousy fundamentals. Stocks are schizophrenic."

After the first Asian economic scare in October of last year, stocks powered back to break new ground. The Dow traded above the 9,000 mark for the first time ever this past April. It climbed as high as 9,262 earlier this month.

Yesterday, Wall Street was rattled by the slump in the Japanese yen, which was expected to make Japan's exports cheaper and could hurt U.S. companies that do business with the world's second largest economy.

"We haven't seen the worst effects of Asia, and there is a feeling corporate earnings aren't going to be good," said Peter Cardillo, director of research at Westfalia Investments.

Reuters contributed to this report.