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Nasdaq hits 13-month low
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November 29, 2000: 4:50 p.m. ET
Valuation concerns spark tech sell-off; Dow industrials stage strong rally
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - The Nasdaq composite index tumbled to a 13-month low Wednesday amid renewed concern about the effect a slowing economy would have on corporate revenue growth, especially in the technology sector.
"Basically, the Nasdaq is suffering from a deflation in valuations and the fact is it's a rough ride," said Peter Coolidge, senior trader at Brean Murray & Co. "At the same time, some are arguing that valuations are too lofty so we are in a turbulent market."
 The Nasdaq fell 28.83, or around 1 percent, to 2,706.15, setting a 13-month closing low. The index recovered from a nearly 3 percent decline during the session, which analysts said was the one positive for the tech-heavy index.
Still, if the index closed the year at current levels, it would be the worst year since 1974, when the Nasdaq shed 35 percent. The composite is now 33.4 percent down from the start of the year.
Any negative news regarding the tech sector sends investors running for the proverbial exit, and analysts say a strong catalyst is needed to provide the impetus and confidence needed for a significant rally.
"We need some capitulation in the economy and if we get any sort of turnaround in the economy we can turn this market around on the Nasdaq," Art Hogan, chief market analyst with Jefferies & Co., told CNNfn's Street Sweep. "We're clearly in a market searching for a bottom."
The Nasdaq could be in for a rocky start on Thursday, given that several technology companies issued warnings after the bell Wednesday.
Money flowed into the blue chip stocks that make up the Dow Jones industrial average, after a report showed the economy grew at a rate slower than originally reported in the third quarter but faster than analysts' expectations.
'"Old economy' stocks seem to be back in vogue but it's nervous trading," said Coolidge. He also noted that money was moving into cyclical issues, which are less vulnerable to taking a 'leap of faith' by investors.
 The Dow soared 121.53 points, or more than 1 percent, to 10,629.11, while the S&P 500 advanced 5.68 to 1,341.77.
Market breadth was negative. On the New York Stock Exchange, decliners outpaced advancers 1,451 to 1,415, as more than 1.1 billion shares changed hands. Losers beat winners on the Nasdaq 2,547 to 1,383, as more than 2.02 billion shares were traded.
In other markets, treasury securities rose. The dollar advanced against both the euro and the yen.
Slow economy and turbulent techs
Confirmation of an economic slowdown prompted buying among the blue chips, while the tech sector continued to take a beating, led by hardware and software providers.
"I think there's a sense that a whole lot of the uncertainty, whether it's on the economic front or the electoral front, may be coming to an end," said Charles Payne, head analyst at Wall Street Strategies. "They're first sheltering themselves in blue chips and safety but, as confidence builds up, it will start to trickle down into the Nasdaq."
 Hardware and software providers sent the Nasdaq lower. Dell (DELL: Research, Estimates) fell 63 cents to $21.81, Microsoft (MSFT: Research, Estimates) dipped $1.94 to $65.06, and Sun Microsystems (SUNW: Research, Estimates) shed $1.50 to $79.75.
In the day's economic news, the U.S. economy grew at an annual rate of 2.4 percent in the third quarter, the slowest pace in four years, according to the Commerce Department. But the downwardly revised number for the gross domestic product (GDP) beat forecasts of 2.2 percent.
The department said that American corporations' after-tax profits rose by just 0.6 percent in the third quarter, the weakest performance in nearly two years. An inflation gauge tied to the GDP showed prices rising at an annual rate of 1.9 percent in the third quarter, the slowest such rate this year.
One analyst said the reaction to the data was positive, as investors started buying Dow issues -- a move that would eventually spread to technology once investor confidence increased that uncertainties were being eliminated.
Elizabeth MacKay, chief market strategist at Bear Stearns, told CNNfn's In the Money that the markets reacted positively to the fact that the economy isn't growing as slowly as some investors feared. (435K WAV) (435K AIFF)
Investors sought safety in cyclical stocks found on the Dow, hoping that uncertainties would be eliminated but not convinced that technology stocks were invulnerable.
 Leading the Dow's advance were Wal-Mart Stores (WMT: Research, Estimates), jumping $2.88 to $51.88, and Boeing (BA: Research, Estimates), rising $2.44 to $69.94.
Financial and drug issues also helped the Dow. American Express (AXP: Research, Estimates) gained $1.81 to $56.94, Citigroup (C: Research, Estimates) rose $1.81 to $49.44, and Merck (MRK: Research, Estimates) advanced $2.25 to $94.88.
"What we really need to do is see some solidification. A lot of people are sitting on their hands and people are not willing to step up to the plate just yet," Brian Belski, market strategist with U.S. Bancorp Piper Jaffray, told CNNfn's market coverage.
Election outcome still muddy
In the latest development in the contested race between Democrat Al Gore and Republican George W. Bush, a Palm Beach County, Fla., circuit court judge Wednesday cleared the way for 3,300 disputed ballots to be transferred to a courthouse in Tallahassee, where the Gore campaign is seeking to have the votes counted along with 10,000 ballots from Miami-Dade County.
The Gore campaign is hoping to speed up that process, with a source in the Gore campaign saying he would appeal to both an appeals court and the Florida Supreme Court to have an immediate recount begin.
 The judge in Tallahassee scheduled a Saturday morning hearing to further consider Gore's challenge.
The uncertainty about the election outcome has persisted in keeping some investors on the sidelines -- although, with the end in sight, some have opted to come back cautiously into the market.
"I think politics are a sideshow right now," Alan Skrainka, chief market strategist with Edward Jones, told CNNfn's Before Hours. "We think the best thing an investor can do is step up their buying gradually as prices move lower." 
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