Well, that was quick.
As is so often the case with stock market rallies, the rally only lasted one day as more bad news, namely earnings warnings from major players both in and out of technology, sank the market and eroded a good portion of Tuesday's gains.
The Dow Jones industrial average plunged 233.59, or 2.14 percent, to 10,665.13, while the Nasdaq Composite Index dropped 92.80, or 3.21 percent, to 2,797.00. The Standard and Poor's 500 index fell 25.05, or 1.82 percent, to 1,351.49.
The Dow was socked when Bank of America warned it would fall well short of expectations in the fourth quarter. Adding to Dow pain and hurting the Nasdaq was a research note from Salomon Smith Barney over Intel, which lowered its earnings estimates and said Intel's fourth quarter is "shaping up to be the worst in over a decade." The final blow was an earnings warning from Apple.
The rally was short-lived due to the earnings warnings and a rumor that the Federal Reserve may cut rates next week, instead of just going to a neutral bias, which means the Fed may have overtightened and we're heading for a harder landing than anticipated, according to Peter Cardillo, director of research for Westfalia Investments, in New York.
"Fear is gripping the market, and that fear is recession," said Cardillo. He thinks that fear is overstated. "I think they'll cut (interest rates) in January, but they will go to a neutral stand in December." Friday's employment figures have become even more important in terms of the condition of the market and how the Fed may react.
Semiconductors
This whole sector took a pounding due to Intel's woes. Transmeta (TMTA) dropped 6 3/16 to 30 13/16, PMC Sierra (PMCS) fell 6 7/8 to 120 1/8, Intel (INTC) plunged 4 3/16 to 31 13/16, Broadcom (BRCM) was down 2 9/16 to 115 5/8, Motorola (MOT) was down 1 1/8 to 17 7/8 and Micron (MU) lost 1 7/16 to 31 11/16. Analog Devices (ADI) avoided the massacre and jumped 2 5/8 to 58 3/4.
Hardware
Apple's woes took down this whole sector. IBM (IBM) fell 6 5/8 to 96 3/4, Compaq (CPQ) plunged 4.30 to 20.10, or 17 percent of its value after CS First Boston and Janney Montgomery Scott both downgraded the stock, Dell (DELL) was off 2 1/4 to 18, Apple (AAPL) fell 2 11/16 to 14 5/16, Lexmark (LXK) was down 4 1/8 to 44 9/16 and Hewlett-Packard (HWP) lost 3 to 32, despite a reassurance from CEO Carly Fiorina that the company was on track for future quarters.
Software
There were no warnings in this sector, but software stocks went down along with the hardware companies. Adobe (ADBE) plunged 9 1/2 to 67 3/16, Macromedia (MACR) fell 7 1/16 to 70 7/8, Intuit (INTU) was off 2 3/16 to 48 11/16, Microsoft (MSFT) dropped 3 3/16 to 56 11/16, Computer Associates (CA) lost 1 5/16 to 27 1/4 and Oracle (ORCL) dropped 1 5/16 to 30 3/16. Symantec (SYMC) was the exception to the bad day, up 3/8 to 37 1/2.
Consumer Internet
Yahoo (YHOO) plunged 6 3/8 to 37 1/2 after a Merrill Lynch analyst cut his first- and second-quarter revenue and earnings estimates but raised his forecast for the company's third and fourth quarter. EBay (EBAY) dropped 3 3/16 to 36 5/16, Amazon (AMZN) lost 1 3/4 to 23 5/8 and CMGI (CMGI) slipped 3/4 to 11 9/16. AOL (AOL) gained 0.53 to 44.61 and Liberate (LBRT) gained 13/16 to 14 5/16.
Networking
Juniper (JNPR) lost everything it gained on Tuesday after Ericsson announced it was selling 10.1 million Juniper shares. Juniper plunged 15 45/64 to 140 19/64, Ciena (CIEN) dropped 4 7/16 to 95 3/8, JDS Uniphase (JDSU) lost 2 1/2 to 65 5/8, Lucent (LU) lost 1 3/4 to 15 1/16 and Tellabs (TLAB) was off 1 3/8 to 65 13/16. Level 3 (LVLT) gained 3/4 to 31 1/16 and Corning (GLW) picked up 5/8 to 69 3/4.
Telecommunications
Ericsson (ERICY) lost 5/16 to 13 5/16, Nortel (NT) lost 1/2 to 40 1/8 and Sprint (FON) fell 9/16 to 23 5/16. Verizon (VZ) picked up 1 to 58 3/4, AT&T (T) gained 5/16 to 20 11/16 and MCI Worldcom (WCOM) was up 7/16 to 15 1/8
