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NEW YORK - Even in the new year, investors in technology shares can’t get a break.
The faltering Nasdaq plunged 178.66 points yesterday, or 7.2 percent, to 2291.86, its lowest close since March 4, 1999. It was the tech-heavy index’s seventh-biggest percentage loss since its 1971 inception.
Many of the same problems that haunted stocks in 2000 took them down again: recession fears and a weakening profit picture.
"Even though the market has come down a lot, the short-term news doesn’t look positive, so you’re not seeing new money coming in off the sidelines," said Robert Harrington, head of listed equity trading at UBS Warburg. "Investors are reluctant to commit. They are genuinely concerned about the slowdown in the economy, and the bad news doesn’t give them a reason to act any differently."
Much of the damage came from a downgrade of data-storage stocks by Robertson Stephens analyst Dane Lewis.
The negative comments renewed fears that the slowing economy will take a bigger bite out of corporate profits than analysts had expected.
"The Street is finally starting to understand how economically sensitive tech can be when there is a rapidly decelerating economy," said Charles Pradilla, strategist at SG Cowen.
Blue-chip stocks also got off to a poor start in 2001.
The Dow Jones industrials fell 140.70 points, or 1.3 percent, to 10,646.15. The Standard & Poor’s 500 index was down 2.8 percent, falling 37.01 points to 1,283.27.
The market spent most of the day focused on earnings, with some of the most visible hemorrhaging in technology issues.
EMC fell 18 percent, down $12.19 to $54.31, after Robertson Stephens cut the network storage systems company from "buy" to "long-term attractive," citing the slowing economy. Cisco slid 13 percent, down $4.94 to $33.31.
Blue chips were pulled lower by GE, which fell $4.19 to $43.75, a 9 percent loss, amid published reports about problems with its jet engines that some fear could hurt its profits.
A handful of analyst downgrades compounded the market’s pessimism. Boeing slid $4 to $62, a 6 percent drop, after First Union reduced the company’s rating to "buy" from "strong buy."
"The focus today seems to be on downgrades, and until we get a better catalyst, that’s probably how it’s going to continue to be," said Arthur Hogan, chief market analyst at Jefferies & Co.
Analysts said the declines reflect worries that have dogged the market since Labor Day. Investors are no longer confident that companies, particularly those in the high-tech sector, can deliver results worthy of even reduced stock valuations.
The Federal Reserve last month hinted that interest rate cuts are a possibility in the near future, but that prospect alone hasn’t been enough to cheer Wall Street.
"The ray of sunshine here in the Nasdaq are some of the semiconductor names. Stocks like Intel and Applied Materials that have already been beaten down seem to be holding their ground," said Scott Bleier, chief market strategist at Prime Charter.
Intel rose $1 to $31.06 and Applied Materials gained $1.31 to $39.50.
Declining issues led advancers 3 to 2 on the New York Stock Exchange. Consolidated volume came to 1.36 billion shares, compared with 1.02 billion Friday.
The Russell 2000 index tumbled 21.04 to 462.49, a 4.4 percent decline.
Overseas yesterday, Germany’s DAX index fell 2.2 percent, Britain’s FT-SE 100 slipped 0.7 percent, and France’s CAC-40 lost 2.2 percent. Japan markets were closed.
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