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Follow UsElizabeth Lazarowitz
NEW YORK: Technology stocks screamed lower for the second day in a row on
Wednesday, as Wall Street's worries about weakening earnings growth in
computer-related companies sparked a fury of selling.
Blue chip shares, meanwhile, eked out a modest gain, lifted in large part by
JP Morgan, which blasted to a record high on speculation it could be the subject
of a takeover bid.
Pessimistic comments on technology companies from Wall Street analysts have
spooked the market in recent days, analysts said, spurring investors to cash in
on strong gains in the high-tech sector made over the past month.
"The good news is that the economy is slowing and the Fed will not raise
interest rates. The worry is that earnings growth will not be strong enough to
support any stocks with high multiples," said First Albany Corp chief
investment officer Hugh Johnson, referring to the tech sector's high-fliers.
The Nasdaq Composite Index slumped 129.84 points, or 3.13 per cent, to end at
4,013.34, according to the latest available data, after tumbling more than 2 per
cent in the prior session.
The Dow Industrial Average rose 50.03 points, or 0.44 per cent, to 11,310.64,
while the Standard & Poor's 500 index .SPX), a broader measure of the
market, finished down 14.83 points, or 0.98 per cent, at 1,492.25.
Losses in semiconductor shares helped knock the wind out of much of the
technology sector. Top computer chip maker Intel Corp. tumbled $3-35/64 to
$65-45/64, a day after an analyst's comment that it could experience weaker
sales in the third quarter sent its shares screeching lower.
On the New York Stock Exchange, chip maker Micron Technology Inc., tumbled 10
per cent on an analyst's report that the company will face lower prices for its
memory chips.
Donaldson Lufkin & Jenrette cut its rating on Micron to underperform from
buy and set a price target of $50 on the stock, more than a third below its
closing price on Tuesday. Micron's shares ended the day down $9-9/16 at
$68-13/16.
The Philadelphia Stock Exchange's semiconductor index .SOXX) fell 5.7 per
cent.
Analysts said the negative views fed investor's suspicions that a slower pace
of earnings might not justify the high price tags on many technology stocks.
"The expectations currently priced in the market about (corporate)
profit growth appear somewhat to be extremely optimistic," said Chase
Manhattan chief economist John Lipsky.
Marshall Acuff, an equity analyst at Salomon Smith Barney said that a growing
sensitivity to prices was helping drive investors into selected blue chip names,
which are viewed as providing more bang for the buck in the quarters ahead.
"You're getting better value there relative to future growth,"
Acuff added.
Blue chip shares also got some help from fresh economic data showing US
productivity jumped a better-than-expected 5.7 per cent in the second quarter,
which is seen as capping inflation and therefore helping make the case the
Federal Reserve will keep interest rates steady.
Meanwhile, JP Morgan saw its shares shoot to a record high of $171-5/8
earlier Wednesday on a report that Europe's No. 1 bank, Deutsche Bank AG,
renewed talks to buy it. It ended the session $7-13/16 higher at $167-3/4.
Shares of JP Morgan have risen more than 10 per cent since Switzerland's No.
1 bank, Credit Suisse Group, agreed last week to buy US investment bank
Donaldson Lufkin & Jenrette.
The DLJ deal spurred investor interest in JP Morgan, one of the few remaining
independent Wall Street firms. Analysts increased their share price targets for
the company, saying the firm was undervalued based on recent acquisitions.
Citigroup Inc., however, slid $3 to $54-15/16 after the No. 1 US financial
services company said it would acquire for $31.1 billion Associates First
Capital Corp., the nation's biggest finance company.
Oil services stocks, meanwhile, were swept higher as US crude oil futures
shot to a 10-year peaks. Dow component and oil giant Exxon Mobil rose $1-2/16 to
$83-15/16, and the Standard & Poor's International Oil index .SPOIL) climbed
1.6 per cent.
(C) Reuters Limited 2000.