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Markets & Stocks
Nasdaq falls below 2,000
March 12, 2001: 5:12 p.m. ET

Wall St. goes back in time, as Nasdaq revisits 1998 and S&P 500 sees bear market
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Nasdaq composite index sank below 2,000 for the first time in almost 27 months Monday amid new worries that the slowing U.S. economy has not finished eroding corporate profits.

In a sell-off that spread beyond technology stocks, the Dow Jones industrial average posted its fifth-biggest point loss on record as investors unloaded General Electric, J.P. Morgan Chase and 3M.

And the S&P 500, the broadest of the three indexes, fell into bear market territory for the first time since the last recession in 1990.

graphic"We are in a state of semi-panic in the markets," Al Goldman, chief market strategist at A.G. Edwards, told CNNfn's Market Call. "A lot of irrational depression and a lot of irrational selling is going on."

Cisco Systems, whose gains helped propel the Nasdaq above 5,000 one year ago last week, tumbled 9 percent after three brokerages cut their profit forecasts for the computer networking company.

Mobile phone maker Ericsson, meanwhile, warned it could lose more than a half-billion dollars in the current quarter, joining the drumbeat of technology firms with financial disappointments.

The market also continued to struggle with problems from Friday, when No. 1 chipmaker Intel readied Wall Street for a sales shortfall and investors ratcheted down their most optimistic forecasts for Federal Reserve interest rate cuts.

Unlike past sell-offs, investors found no safety in drug, tobacco and utility stocks that have gained during the 52-week tech sell-off. Treasury securities drew only modest buying and all of the Dow's 30 components fell.

graphicBut the biggest losers once again were technology stocks, whose gains sparked the bull market of the late 1999s. The Nasdaq fell 129.41 points, or 6.3 percent, to 1,923.64 -- its first close below 2,000 since Dec. 14, 1998.

The Dow Jones industrial average tumbled 436.37, or 4.1 percent, to 10,208.25. Its lowest close since Oct. 19, 2000 was the fifth-worst point loss on record.

And the S&P 500 skidded 53.26, or 4.3 percent, to 1,180.16. That drop put the index 22.7 percent below its March record of 1,527, beneath the 20 percent peak-to-trough drop that Wall Street deems a bear market, for the first time since October, 1990.

More stocks fell than rose. Declining issues on the New York Stock Exchange topped advancing ones 2,420 to 694 as 1.2 billion shares traded. Nasdaq losers beat winners 3,106 to 707 as 2.12 billion shares changed hands.

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

Cisco takes a hit

Cisco Systems (CSCO: Research, Estimates) tumbled to its lowest level since late 1998, falling $1.81 to $18.81 after UBS Warburg, ABN Amro and Credit Suisse First Boston all lowered their earnings forecasts for the company.

Cisco, whose shares more than doubled in 1999, announced plans Friday to cut as many as 8,000 jobs, or roughly 16 percent of its total work force. In its announcement, Cisco stopped short of issuing an earnings warning. But the company signaled that it may not meet targets. 

Ericsson (ERICY: Research, Estimates), the Swedish-based mobile phone maker, left no doubt. The company's shares tumbled $2.09 to $6.28 after warning that the deteriorating U.S. economy will cause it to lose $510 million in the current quarter.

graphicChipmaker Silicon Storage (SSTI: Research, Estimates) fell $1.19 to $9.31. The company warned that sales in the current quarter will fall short of forecasts.

Ericsson and Silicon Storage joined Yahoo! (YHOO: Research, Estimates), Intel (INTC: Research, Estimates), and JDS Uniphase (JDSU: Research, Estimates) and scores of other companies that recently lowered sales or profit outlooks for the current quarter.

With the economy slowing, consumers and businesses have pulled back on spending, hurting corporate profits.

The day's losses went beyond tech stocks. General Electric (GE: Research, Estimates) fell $4.21 to $39.60, J.P. Morgan Chase (JPM: Research, Estimates) declined $3.46 to $45.39, and 3M (MMM: Research, Estimates) lost $4.61 to $111.80

In a nod to the fast-weakening profit picture, UBS Warburg chief portfolio strategist Ed Kerschner Monday cut his 2001 earnings outlook for companies in the S&P 500 Index by 3.5 percent.

Kerschner, ranked Wall Street's top strategist last year by Institutional Investor, linked the move to a decline in manufacturing and a drop in corporate spending.

Monday's losses mean the Nasdaq is now down 62 percent from its record high of 5,048.63 reached a year ago Saturday. The index, which fell 39.2 percent last year, is off another 22 percent in 2001.

"I think a lot of people want to let the market find a bottom before they step back in," Nick Angilletta, global head of retail sales at Salomon Smith Barney, told CNNfn's The Money Gang.

Buying on market dips, which proved a successful tech investing strategy before March of last year, has failed during the past 12 months. graphic

"The catalyst here is going to be patience," Barry Hyman, chief market strategist at Weatherly Securities, told CNNfn's Market Call. "We're in a bear market."

Unlike past sell-offs, Monday's sparked none of the defensive buying in drug, tobacco and utility stocks. Merck (MRK: Research, Estimates) fell $1.76 to $73.93, while Philip Morris (MO: Research, Estimates) declined $1.94 to $49.81. The Dow Jones utility index shed 9.87 points to 379.27.

Still, at least one bright spot emerged. American General (AGC: Research, Estimates) rose 57 cents to $38.82 after British insurer Prudential agreed to buy the financial services company for $26.5 billion in stock.

The Fed ahead

Investors have been pinning their hopes for a turnaround in corporate profits on the Federal Reserve, which next week is expected to cut interest rates for the third time this year. Faced with a fast-weakening economy, the central bank slashed rates by a full percentage point in January.

But a report last Friday showing that the economy created a surprisingly large number of jobs last month dampened some hopes about the size and number of rate reductions in the months ahead.

Mike Boss, bond futures trader at IBJ Lanston Securities, told CNNfn's Before Hours that the market expects the Fed to lower rates by a half-percentage point on March 20. "The big question becomes two or three months from now," he said.

Still, U.S. investors faced with a year of losses may take some comfort that things could be a lot worse. Japan's major stock index, the Nikkei,  finished at a fresh 16-year low Monday. 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.