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Triple-digit loss on Nasdaq
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December 13, 2000: 4:54 p.m. ET
Compaq warning sparks broad tech sell-off; Dow holds 'Bush' gains
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - Technology stocks plunged Wednesday after a revenue and earnings warning from Compaq Computer sparked a broad sell-off -- overshadowing investor relief that the presidential election stalemate appears to be ending.
Compaq's warning set off broad selling in the tech-heavy Nasdaq composite index for the second straight session, as investors turned their attention to questioning how these companies would fare in a slowing economy.
But the Dow Jones industrial average struggled to hold onto gains, as stocks seen as faring better under Republican leadership, such as drug and tobacco issues, paced the advance.
"The market had discounted this (election) news so we had a little profit taking," John Hughes, market analyst with Shield's & Co., told CNNfn's market coverage.
 The Nasdaq tumbled 109.00 points, or more than 3 percent, to 2,822.77, just two days after closing above 3,000 for the first time since mid-November.
The Dow tempered its gains, rising 26.17 to 10,794.44. The blue-chip indicator rose as much as 140 points before investors cashed in. The S&P 500 slipped 11.19 to 1,359.99.
"We got a little bit of a pop from the Supreme Court ruling," said Bill Meehan, chief market analyst at Cantor Fitzgerald. "I think some of the strength we've seen was discounting a Bush presidency. Obviously the uncertainty was not what was hurting the Nasdaq -- earnings would be impacted by a slowing economy."
Vice President Al Gore will address the nation Wednesday night, with aides indicating the Democrat will concede the presidential race, after studying a U.S. Supreme Court decision that appeared to make any further recount in the close election impossible. Republican candidate George W. Bush is also expected to speak after Gore finishes.
 Analysts say this could lead the markets briefly higher Thursday. "I think there's a possibility that after Vice President Gore makes his comments, I would expect a little bit of a relief rally tomorrow," Michael Holland, chairman of Holland & Co., told CNNfn's Street Sweep.
Market breadth was negative. Decliners beat advancers on the New York Stock Exchange 1,598 to 1,259, as more than 1.18 billion shares were traded. On the Nasdaq, losers outpaced winners 2,335 to 1,577, as more than 2.02 billion shares changed hands.
In other markets, Treasury securities edged higher. The dollar strengthened against both the euro and the yen.
Compaq warning leads sell-off
Another round of corporate results warnings in the tech sectors sparked broad selling, and investors sought comfort in blue chips in light of the expected end to the contentious presidential race.
Compaq Computer (CPQ: Research, Estimates) tumbled $2.67 to $18.10 after the computer maker warned that fourth-quarter earnings and sales would be below expectations.
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"You're still seeing people like Compaq worried about the quarter so you're seeing more pressure on high multiple stocks," said David Beard, portfolio manager at Morgens Waterfall Vintiadis. "The market is still trying to find a bottom but selling on continued fears of warnings."
The warning hurt other hardware makers. Dell Computer (DELL: Research, Estimates) fell $1.25 cents to $20.44, and Apple Computer (AAPL: Research, Estimates) shed 38 cents to $15.
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The chip sector also faltered for the second straight session. Applied Materials (AMAT: Research, Estimates) fell $2.81 to $42.69, and Intel (INTC: Research, Estimates), both a Dow and Nasdaq component, slid $1 cents to $35.50. The Philadelphia semiconductor index was down 5 percent.
But one stock found on both the Dow and Nasdaq expected to benefit from a Bush administration, Microsoft (MSFT: Research, Estimates), gained $1.13 cents to $57.25, after Prudential Securities cut its rating to "hold" from "accumulate."
Investors rotated money away from most of the techs into blue chips, gaining confidence from the expected election resolution.
"Compaq is weighing down the Nasdaq, but we're getting a rotation into Dow stocks," said Art Hogan, chief market strategist with Jefferies & Co. "It (the election) got so petered out after 35 days that it was hard to get much of a reaction."
And, in a note to clients, Merrill Lynch's chief U.S. investment strategist Christine Callies wrote, "the Supreme Court's ruling on December 12 significantly increases the prospect that the election should be concluded with the Electoral College vote. Therefore, we are raising our equity exposure accordingly by shifting 5 percent from cash to equities."
 Drug and tobacco stocks, both seen as benefiting from a Bush administration, rose. The Republican was expected to ease regulatory and legal challenges to the two industries.
In the drug sector, Dow component Johnson & Johnson (JNJ: Research, Estimates) rose $1.69 to $99.69 while Pfizer (PFE: Research, Estimates) added $1.81 to $45.81. Among tobacco stocks, Dow component Philip Morris (MO: Research, Estimates) rose $1.94 to $40.81, near a 52-week high, and R.J. Reynolds (RJR: Research, Estimates) surged $4.25 to $45.94 to set a 52-week high.
Click here for a look at the entire drug sector
Retail sales weaker than forecast
With holiday shopping season in full swing, market watchers are focusing on the pace of consumer buying -- and the latest data signaled a steep fall in retail sales.
U.S. retail sales fell 0.4 percent in November, according to the Commerce Department, the first decline since April and much weaker than Wall Street's forecasts for a small increase.
It was the latest sign of a slowdown in the world's largest economy. Excluding autos, sales edged up 0.2 percent, also lower than economists' estimates.
Click here for a look at the entire retail sector
Another sign of a slowdown in consumer spending came from Whirlpool (WHR: Research, Estimates) which tumbled $2.75 to $41.44 after the appliance maker warned that fourth-quarter earnings and sales would be below Wall Street forecasts, and said it would cut up to 6,000 jobs.
Keeping an eye on the Fed
With the election uncertainty close to ending, investors are also taking comfort in the belief that Federal Reserve Chairman Alan Greenspan may move toward a more neutral bias on interest rates when the Fed's policy-making arm meets on Dec. 19.
Financial issues, which fare better when investor sentiment indicates confidence in the possibility that rates may fall, showed solid gains. J.P. Morgan (JPM: Research, Estimates) gained $5.81 to $164.25, and American Express (AXP: Research, Estimates) advanced 31cents to $56.50.
 Eyes will focus on incoming economic data for further confirmation that the economy is indeed slowing and the Fed may move to cut rates as early as January.
Bryan Piskorowski, market analyst at Prudential Securities, told CNNfn's market coverage that market won't rally until the Fed's cuts interest rates. (284K WAV) (284K AIFF). 
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