After IBM warned of weaker earnings, traders sent its stock into free fall. Big Blue plunged $21 (19 percent), its biggest one-day hit since the 1987 crash.
"IBM is making money," Chuck Phillips of Morgan Stanley Dean Witter said. "But we were expecting them to make more money and expecting more growth. And that's what counts in stocks."
IBM's swan dive was so steep, it accounted for more than half of the Dow's 94-point fall.
Paine Webber's Arthur Cashin explained, "There are 30 to 50 companies that have been powering these averages. And when one key one, like IBM, turns around, the impact is felt broadly across the market."
|The level of households involved in the stock market is at a historical high.|
One of the most widely held stocks, IBM blamed consumers' Y2K worries for sluggish sales. But some analysts said the real reason may be a saturated market.
Chuck Phillips, of Morgan Stanley Dean Witter, blames "great technologies they came out with four quarters ago. Which was great, and a lot of people bought it -- but they've already bought it. It's the same analogy if GM came out with a great new car and we all bought it in the same year, they wouldn't sell any cars for a couple years."