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Markets & Stocks
Nasdaq hits 25-month low
February 22, 2001: 5:11 p.m. ET

Tech index falls for a fourth day and returns to levels of early 1999
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NEW YORK (CNNfn) - Fresh evidence that sales at technology companies are slowing sent the Nasdaq composite index to its lowest close in more than two years Thursday.

The Nasdaq's latest problems came from data storage stocks. Brocade Communications lowered revenue targets while EMC Corp. warned about weaker growth ahead.

But technology stocks, which fell for a fourth straight session, weren't the only losers. A sell-off in drug and retail stocks kept the Dow Jones industrial average under pressure. The Dow's worst performing component, Coca-Cola, fell for a second day on worries about the soft-drink maker's profit growth. In a volatile trading session, the Dow industrials swung in an a 194-point range.

graphicThursday's sell-off did nothing to keep Wall Street analysts from playing an old game: Picking the market's bottom. The Nasdaq has fallen 55 percent in less than a year, defying many who kept betting on a turnaround.

"This may not be the bottom today (Thursday), but we are getting very near the point where it's interesting to buy these stocks," David Briggs, head of equity trading at Federated Investors, told CNNfn's market coverage.

Some of the hardest hit tech stocks drew buyers. Cisco Systems and Sun Microsystems both gained after falling to 52-week lows on Wednesday.

"There's not a bubble in this market today," Charles Lemonides, chief information officer at ValueWorks, told CNNfn's Talking Stocks.

The morning's worst losses came after a report suggested the faltering U.S. economy might rebound later this year. That news dashed some hope for the aggressive interest rate cuts that many hard-hit stock investors want.

The Nasdaq dipped 23.98 points, or 1 percent, to 2,244.96. Thursday marks the lowest close for the Nasdaq since Jan 4, 1999, when it finished at 2,208.05. But the close also marks a turnaround. Earlier in the session, the Nasdaq fell as much as 4 percent to levels last seen in late 1998.

graphicThe Dow Jones industrial average ended little changed, inching up 0.23 to 10,526.81, while the S&P 500 lost 2.45 to 1,252.82.

More stocks fell than rose. Declining issues on the New York Stock Exchange topped advancing ones 1,902 to 1,141 as 1.3 billion shares traded. Nasdaq losers beat winners 2,450 to 1,289 as 2.4 billion shares changed hands.

In other markets, the dollar rose against the euro and yen. Treasury securities slipped.

More tech losses

Among the day's biggest losers, Brocade Communications (BRCD: Research, Estimates) fell $2.75 to $45.94 after becoming one the latest tech firms to lower growth targets. Brocade, which makes switches and software to connect data networks, said revenue growth would be flat or show a "very modest" rise in the fiscal second quarter over the first.

EMC (EMC: Research, Estimates) tumbled $2.60 to $40.35. The data storage leader said its 2001 revenue will grow 25 percent-to-35 percent, disappointing some investors. Morgan Stanley Dean Witter slashed its rating on EMC to "neutral" from "strong buy."

graphicOther storage issues suffered. Veritas (VRTS: Research, Estimates) shed $6.81 to $65.56 and Network Appliance (NTAP: Research, Estimates) lost 50 cents to $33.81.

"The main problem is things keep getting worse in the technology space," Phil Dow, stock market strategist at Dain Rauscher Wessels, told CNNfn's market coverage.

Dow sees few catalysts to turn stocks around -- except for their fast-cheapening prices, which eventually may draw buyers. Brocade, EMC, Veritas and Network Appliances all finished above their lows for the day.

Buyers moved into Cisco Systems (CSCO: Research, Estimates), which fell Wednesday to levels last seen in early 1999. Cisco rose $1.31 to $26.44.

The losses also abated for Sun Microsystems, which rose $1.19 to $20.81 after a 12 percent slide Wednesday. Investors awaited a conference call, scheduled to begin after markets close Thursday, on Sun's fiscal third quarter outlook.

Efficient Networks (EFNT: Research, Estimates), meanwhile, jumped $10.69 to $23.06 after Germany's Siemens agreed to buy the broadband network company for $1.5 billion in cash. 

The Dow biggest winner, IBM (IBM: Research, Estimates), rose $1.39 to $108.90, but is still well off  the $116 level it hit earlier this month. But Coca-Cola (KO: Research, Estimates) lost $1.93 to  $52.99, falling for a second day after Goldman Sachs cut the soft-drink maker's earnings estimates.

Drug and retail stocks also fell. Merck (MRK: Research, Estimates) lost $1.01 to $77.70 while gave up 95 cents to $40.

The market's worst levels of the day came shortly after the release of the January Index of Leading Economic Indicators, which rose 0.8 percent. The jump in the gauge designed to forecast the economy six months ahead came in twice Wall Street forecasts.

Thursday's LEI figures also counter a string of economic data showing sinking consumer confidence, a weakening job market and a contracting manufacturing sector.

graphicBut Steven Wood, economist at FinancialOxygen.com, said the LEI's gains, when coupled with December's big revised decline -- the largest drop in five years – masks overall weakness.

"Despite this gain the outlook is still for sluggish growth over the next six months," Wood said.

The Fed lowered borrowing costs twice in January to revive the economy. But the major indexes are still lower on the year, and many analysts don't see stocks rebounding until further rate cuts begin reviving corporate profitability.

Lower rates may have to wait until March 20, when Fed policy makers next meet.

The latest read on the labor market showed continued signs of softness. The number of Americans filling for jobless benefits rose by 4,000 to 348,000 last week.

Corporations are trimming their payrolls. Dell Computer, Nortel Networks and Motorola all have all cuts jobs in recent weeks.

Fred Sears, portfolio manager at Investor Capital Funds, sees more layoffs ahead. He's cautious about the stock market and does not anticipate an earnings pickup for several quarters.

"Stocks are still overvalued," Sears told CNNfn's market coverage.

They've clearly lost value. The Nasdaq composite index is now 9.1 percent lower on the year, following a record 39.2 percent slide in 2000. The Dow is off 2.4 percent in 2001. But it hasn't been a straight shot down. Last month, the Nasdaq was up as much as 15.7 percent for the year while the Dow was once up 1.8 percent in 2001.

The indexes began their most recently slide around the time that Alan Greenspan, the Federal Reserve chairman, gave a surprisingly upbeat outlook on the economy to Congress. Investors took his words to mean that the Fed is in no hurry to cut interest rates to spark growth.

And even if the Fed does eventually lower rates, it often takes months for cheaper borrowing costs to turn the economy around.

"We need some kind of catalyst to get us out of this trading range," John Pickett, of LaBranche Securities, told CNNfn's Street Sweep. "And I don't seen any on the horizon." graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.