By Amy Baldwin
AP Business Writer
NEW YORK — Stocks fell sharply yesterday as investors, unnerved by an unexpected revenue warning from Intel, gave up hope that the economy and earnings would soon improve. The Dow industrials plummeted more than 200 points and the Nasdaq composite more than 100.
Investors found plenty of other reasons to sell. Late yesterday, Cisco Systems became the third big high-tech company this week to announce a bleak outlook, following Intel and Yahoo!. And the government said the nation's employers created more jobs than the market expected, decreasing the chances of a big interest rate cut later this month.
The Dow skidded 213.63 to 10,644.62, ending a five-day winning streak. That run-up, however, enabled the index to end the week up 1.7 percent, or 178.31.
The Nasdaq composite index plummeted 115.95 to 2,052.78, its lowest close since Dec. 17, 1998, when it stood at 2,043.88. For the week, the Nasdaq lost 64.85, or nearly 3.1 percent.
The Standard & Poor's 500 index dove 31.32 to 1,233.42. The S&P ended the week off 0.76, nearly 0.1 percent.
The latest tech selloff came as the Nasdaq approached the one-year anniversary of its record high close — 5,048.62 set on March 10, 2000.
The composite has slid about 59 percent from that high, and many of its stocks are trading at similarly depressed levels. Intel, for example, is trading at about 75 percent below its March 10 closing price of $120.19.
"The bottom line is you are in a major bear market for technology, and it hasn't gotten any better,'' said Gary Kaltbaum, a technical analyst for First Union Securities. "You have to give the utmost respect to this market and stay out of the way.''
Retreating is exactly what investors did yesterday.
In addition to the latest bad news from the tech sector, the market was smarting from a Labor Department report that said 135,000 new jobs were created in February, ahead of analysts' forecasts of about 75,000. The data, indicating increasing strength in the economy, might relieve some pressure on the Federal Reserve to lower interest rates to stimulate business activity.
Analysts said the market now expects the Fed to lower rates by a quarter point, or perhaps not at all, when it meets March 20. Wall Street had been hoping for a half-point reduction.
Intel, a Dow stock, fell $3.81 to $29.44. The company announced late Thursday that first-quarter sales will fall short of expectations and it will cut 5,000 jobs, largely through attrition.
"That's a pretty big hit to revenues. People aren't happy,'' said Dan Ascani, president and research director for Global Market Strategists in Gainesville, Ga.
In recent weeks, analysts were encouraged when earnings warnings failed to bring the market much lower. Wall Street figured that meant tech stocks were ready to rebound.
"Now you have a bellwether like Intel with poor projections. The market doesn't feel things are getting any better or that the trend in earnings and revenues is changing,'' Ascani said.
Cisco added to the poor tech outlook, announcing late yesterday it will cut up to 3,000 jobs. The network equipment maker fell $2.19 to $20.63.
Other tech losses included Intel competitor Advanced Micro Devices, down $2.70 at $23.30, and Microsoft, which fell $2.56 to $56.69.
While recent economic data such as yesterday's labor report indicate the economy is picking up, analysts say it's going to take longer for techs to fare better. Companies must unload bloated inventories, incurring more losses as they are forced to discount merchandise.
Earlier this week, Intel announced it cut prices by as much as 19 percent on some of its processors.
The recent inventory glut "just flat-lined the industry as demand stopped for some time. I think we are still seeing repercussion from that,'' said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara, Calif.
Financial stocks skidded after Prudential Securities and Salomon Smith Barney downgraded their ratings on several stocks, including Bank One, down 79 cents at $36.10. The Dow's Citigroup lost $1.62 to close at $49.13.
Other Dow hits came from Procter & Gamble, down $1.86 at $69.14, and General Electric, down $2.06 at $43.81.
Declining issues outnumbered advancers 2 to 1 on the New York Stock Exchange where consolidated volume was 1.27 billion shares, compared with 1.32 billion Thursday.
The Russell 2000 index, which measures the performance of smaller companies stocks, fell 7.84 to 473.65. For the week, the Russell lost 3.23, or 0.7 percent.
Overseas markets also declined. Japan's Nikkei stock average slipped 0.2 percent, Germany's DAX index lost 1.0 percent. Britain's FT-SE 100 fell 1.4 percent, and France's CAC-40 ended down 1.3 percent.
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