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Dow up, Nasdaq bleeds
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December 18, 2000: 5:03 p.m. ET
Financials rise ahead of Fed meeting but tech slide lasts another day
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Dow Jones industrial average rose for the first time in three sessions Monday as hopes that interest rates will head lower drew investors into financial stocks.
But the Nasdaq composite index fell within sight of its lowest close of the year amid continued worries about slowing profit growth in the technology sector.
The Federal Reserve meets Tuesday. While economists widely expect the central bank to signal a readiness to lower borrowing costs next year, some forecast an interest rate cut -- the first in more than two years.
 "If they don't do it tomorrow, they will likely do it in January," Sam Stovall, senior investment strategist at Standard & Poor's, told CNNfn's market coverage.
J.P. Morgan, American Express and Citigroup, whose business prospects can improve as rates fall, rose.
But technology stocks resumed a months-long slide as investors bet that their still-high stock prices don't reflect prospects for slower growth as the economy cools.
The Dow gained 210.46 points, or 2 percent, to 10,645.42. But the Nasdaq slipped 28.75, or 1 percent, to 2,624.52. The fifth straight session of losses put the Nasdaq within 27 points of its lowest close of the year: 2,597.93 on Nov. 30.
The S&P 500, a broader market index, rose 10.59 to 1,322.74, one trading session after falling to its lowest close of 2000.
Market breadth was mixed. Advancing issues on the New York Stock Exchange beat declining ones 1,862 to 1,091 as more than 1.1 billion shares traded. Nasdaq losers topped winners 2,442 to 1,597. More than 2 billion shares changed hands.
In other markets, the dollar fell against the yen but was little changed versus the euro. Treasury securities edged higher.
A friendly Fed?
The Federal Reserve, in its last meeting of the year Tuesday, is widely expected to open the door toward cutting rates in 2001. Faced with evidence the economy is slowing, some economists say the Fed might even lower borrowing costs immediately.
But that's a minority opinion.
"It's too soon to do that," Paul Rabbitt, president of RabbittAnalytics.com, told CNNfn's market coverage.
Still, Rabbitt, expects a rate easing sometime in the first three months of 2001.
 Among Dow financial companies J.P. Morgan (JPM: Research, Estimates), surged $6.63 to $166.63, American Express (AXP: Research, Estimates) rallied $2.13 to $56.75 and Citigroup (C: Research, Estimates) added $1.31 to $49.38.
Investors hope that a rate cut could stem the losses to a stock market that has fallen to some of its lowest levels of the year as the economy slows. But tech stocks, among the market's hardest hit sectors, failed to rally Monday.
The losses continued for Microsoft, which late Thursday said sales and profit will miss expectations. Microsoft (MSFT: Research, Estimates) lost $1.38 to $47.81.
Sun Microsystems (SUNW: Research, Estimates) fell $1.88 to $28.56 after Prudential Securities and Merrill Lynch downgraded shares of the workstation maker. And Cisco Systems (CSCO: Research, Estimates) declined $5.22 to $42.94. The maker of Internet hardware said Friday that it earmarked $275 million to cover late payments from customers
"If they are having a hard time getting paid by their customers, what does that say about the rest of the industry?" Angel Mata, head trader at Legg Mason, said on CNNfn's Street Sweep.
Both Cisco and Sun, once among Nasdaq's best performing stocks, came close to 52-week lows Monday. Though down considerably this year, neither Sun nor Cisco are cheap relative to other shares. Both are off at least 20 percent over the last six months but trade at more than 50 times next year's profit forecasts.
Amid some of the highest interest rates in a decade, companies such as Apple Computer (AAPL: Research, Estimates), Eastman Kodak (EK: Research, Estimates) and Intel (INTC: Research, Estimates) have readied Wall Street for disappointing financial results this fall.
More problems emerged Monday as a series of companies announced job cuts or lower-than-expected sales growth.
Aetna (AET: Research, Estimates) said it would cut 5,000 jobs and take a charge of $565 million to account for the cut. Shares of Aetna, the nation's largest health insurer, rose $3.81 to $36.81.
Gillette (G: Research, Estimates) gained $1 to $34.81 after saying it will cut 2,700 jobs, or about 8 percent of its work force, and take a fourth-quarter after-tax charge of $430 million.
 And Time Warner (TWX: Research, Estimates) shed $9.47 to $63.25 after saying that its earnings before interest, taxes and amortization are likely to grow by 11 percent for the full year 2000, rather than the 12 to 13 percent growth expected. The media company, whose purchase by America Online (AOL: Research, Estimates) could conclude early next year, owns CNNfn.
The Nasdaq composite index is off 48 percent from its March high. And the S&P 500 fell to its lowest levels of the year Friday, putting the index off more than 10.6 percent in 2000. The losses, if they hold, would give the index its worst annual performance since 1977, when it fell 11.5 percent.
Internet stocks have been some of the year's biggest losers. That trend continued Monday, with eToys (ETYS: Research, Estimates) falling 75 cents to 28 cents. The Web retailer said after Friday's market close that its fiscal third-quarter sales would fall below expectations due to weaker-than-expected holiday buying. The stock closed as high as $84.25 in October 1999.
Speaking on CNNfn's market coverage, Maureen McCarthy, head of equity trading at Robertson Stephens, talked about the significance of Tuesday's Fed meeting on the day's trading action. (429K WAV) (429K AIFF) 
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