Tech Wreck Derails Stocks

Wall Street stock prices tumbled on Thursday, with a steep slide in technology stocks leading the market lower amid concerns that a strong U.S. economy may lead to higher interest rates. A budding price war in the semiconductor industry also added to tech sell-off.

The Nasdaq Composite index sank 83.34 points, or 3.34 percent, to 2410.07, suffering one of its worst point drops ever after investors dumped technology stocks across the board.

"I think the market just needed a breather again," said Arnie Owen, managing director of equities at Cruttenden Roth. "The appreciation from October, and even from January 1, has been pretty strong and a lot of stocks are just correcting this move."

The Dow Jones Industrial Average declined 62.31 points, or 0.7 percent, to 9,304.50.

Thomas Kurlak, Merrill Lynch's semiconductor analyst, provided the catalyst for the damage in computer-related shares after he sliced his expectations for two prominent chip issues. Kurlak slimmed his opinion of Advanced Micro Devices (AMD) to "neutral" from "accumulate," pointing to below-forecast average selling prices for AMD's K6 microprocessors in the current quarter.

Kurlak blamed AMD's pricing woes on archrival Intel's (INTC) recent 40 percent price cut on its competing Celeron chip. The analyst proceeded to shave his 1999 earnings estimate on Intel to $4.45 a share from $4.60.

AMD stock stumbled 2 1/16 to 18 7/8 and Intel 8 9/16 to 130 1/8. Also, Vitesse Semiconductor 4 7/16 to 47 1/2, Linear Technology 10 7/8 to 93 7/8, and Texas Instruments 5 5/8 to 96.

Some analysts speculated that the softness in chip prices might reflect a slowdown in personal computer demand. That weighed on other pockets of the computer-related universe, with multipoint losses in benchmark technology issues. International Business Machines subtracted 5 11/16 to 169 9/16, Microsoft 7 3/4 to 159 1/16, Sun Microsystems 7 1/8 to 103 3/8, Dell Computer 5 1/2 to 102 3/8, EMC 4 9/16 to 98 11/16, and Lucent Technologies 6 1/8 to 103 7/8.

On the economic docket, the Federal Reserve released the minutes of its Dec. 22 policy meeting, which indicated the central bank held a neutral stance on interest rates. In addition, the Fed said it would deviate from precedent by elaborating on its major policy shifts directly following a policy meeting.

In the stock market, cyclical sectors like retail, transportation, and energy benefited on optimism for continued U.S. economic growth in 1999. But the interest-sensitive financial and utility sectors were dragged down by expectations for higher rates.

Shares of brokerage firms traded mixed following gains earlier in the week. M.H. Meyerson was up 4 15/16, or 66 percent, to 12 3/8; and J.B. Oxford Holdings rose 3 7/8, or 32 percent, to 15 7/8. But National Discount Brokers lost 7 5/8 to 30, Siebert Financial gave back 6 1/4 to 43 1/4, and Ameritrade contracted 17 13/16 to 110 3/4.

E*Trade Group (EGRP) retreaed 1 3/4 to 53 1/2 amid a second day's worth of problems linked to a software bug. Numerous customers reported an inability to place trades on the E*Trade system, which handles about 40,000 transactions daily.

Retailers rang up losses, yet the setbacks were a touch less than those of the overall market after a number of companies unleashed glittery January same-store sales results. Same-store sales refer to sales at outlets open at least a year, and provide analysts with a truer gauge of a retailer's performance. Of the Big Five retail concerns, Wal-Mart Stores (WMT) eased 2 to 83 3/4 after reporting a 10.3 percent rise in same-store sales.

KMart (KM) fell 1/4 to 17 5/8 (+8.5 percent same-store sales), Dayton Hudson (DH) rose 1 9/16 to 65 3/16 (+9.6 percent), Sears (S) declined 3/16 to 40 5/16 (+2.6 percent), and JC Penney (JCP) pulled back 3/8 to 40 3/16 (-0.1 percent).

Especially impressive sales numbers were tallied by Men's Wearhouse (SUIT), off 9/16 to 33 (+16.1 percent); Gap (GPS), down 2 7/8 to 64 1/16 (+15.0 percent); AnnTaylor Stores (ANN), unchanged at 39 9/16 (+13.3 percent); and Claire's Stores (CLE), 1/2 lower to 21 (+14.0 percent).

In Thursday's market indicators:

• The Standard & Poor's 500 Index fell 1.9 percent.
• New York Stock Exchange losers trampled winners by 19 to 11.
• On the Big Board floor, turnover receded 2 percent to 855 million shares.
• Declining issues bettered gainers by 8 to 5 in the Nasdaq Stock Market. Volume totaled 1.09 billion shares.
• The Russell 2000 Index of small-company stocks sank 1.4 percent.

• CompUSA (CPU) advanced 3/4 to 13 7/8. The computer retailer earned 17 cents a share in the fiscal second quarter, a penny richer than the Wall Street consensus estimate as per First Call Corp. But the figure was far less than the 36 cents earned in the same quarter of 1997 due to lower computer prices, the company said. Revenue grew 20 percent.
• Colgate-Palmolive (CL) rose 2 1/4 to 84 11/16. The personal care and household products entity netted 73 cents a share in the fourth quarter vs. 63 cents in the year-ago period. Most analysts had expected a penny less according to First Call Corp.
• Avon Products (AVP) added 4 3/16 to 43 1/2 after the direct marketer of cosmetics logged a fourth-quarter operating profit of 56 cents a share. That was a penny more than most analysts had envisioned according to a survey by First Call Corp. In the same period a year ago, earnings came to 50 cents. Avon said it's confident it will achieve its target for earnings growth in 1999 despite currency weakness in Brazil.
• Fourth-quarter profits at AirTouch Communications (ATI) jumped 34 percent in the fourth quarter. On a per-share basis, earnings came to 22 cents, 4 cents ahead of the Street's mean projection according to a First Call Corp. poll. Revenue rose 59 percent. A surge in its subscriber growth was resposible for AirTouch's upbeat showing, the company said. The shares sank 2 7/16 to 90 9/16.
• Infinity Broadcasting (INF) depreciated 9/16 to 27 7/16. Hefty growth in advertising sales contributed to fourth-quarter operating earnings of 12 cents a share. The First Call Corp. consensus estimate of analysts was for 2 cents a share.
• Honeywell (HON) gained 3 1/16 to 71 1/2. The electrical equipment manufacturer said earnings should grow from 11 percent to 13 percent in 1999, with per-share net coming in between $4.95 a share and $5.05 a share. The First Call Corp. consensus forecast of analysts had called for $4.98 a share.