Dow Ends Below 11,000, Nasdaq Down 91
N E W Y O R K, May 30, 2001 -- Stocks fell after warnings from network computer supplier Sun Microsystems and telecom gear maker Alcatel worried investors the slumping economy will hurt corporate earnings for a longerperiod than expected.
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The Nasdaq composite index fell 91.04 points, or4.18 percent, to end at 2,084.50, according to the latest data,while the Dow Jones industrial average tumbled 166.50points, or 1.51 percent, to 10,872.64. It was the lowest finishfor the major indexes in about two weeks.
"Certainly Sun's earnings warning was much worse thanexpected and weighing heavily on technology stocks," said TimGhriskey, senior portfolio manager at mutual fund companyDreyfus Corp. "There's been a big run-up in tech stocks sinceApril 3 and the sector was really due for a correction."
Year-to-date, the Nasdaq composite is down 15.6 percent,the Dow is up 0.80 percent, and the S&P 500 has dropped 5.5percent.
Looking to Preannouncement Season
Optimism that the nation's economic slowdown was alreadyreflected in stocks boosted the Nasdaq composite index by 41 percent after the market sank to a 2-1/2-year low inearly April. But a stream of profit warnings have since dashedthese hopes, traders said.
"People are thinking horrible thoughts," said KevinConnellan, a trader at Northern Trust, which oversees $390billion. "They're nervous about the preannouncement season, andnervous that [this corporate profit slump] could go out intothe first and second quarter of 2002."
France's Alcatel fell $2.42 to $24.99 on the NewYork Stock Exchange after warning that the earnings of itstelecom business would slip this year. The company, which brokeoff merger talks with rival Lucent Technologies Inc. onTuesday, said restructuring charges and write-downs would leadto a loss of $2.57 billion at the division. Lucent, meanwhile,fell 18 cents to $8.14.
Morgan Stanley rang another sour note on Wall Street bydowngrading Nortel Networks Corp., JDS UniphaseCorp., Tellabs Inc., and SycamoreNetworks Inc.. The Wall Street house blamed weakeneddemand and said there was no evidence of impending recovery.
Nortel lost $1.27 to $13.35 on the NYSE. JDS fell $2.23 to$16.94 on the Nasdaq. Tellabs sank $3.45 to $33.93. Sycamoreskidded $1.24 to $8.99.
While tech shares such as Intel Corp. weighed on themarket, so-called "Old Economy" bellwethers weren't far behind.International Paper Co. lost $1.18, or 3 percent, at$37.82.
Bonds rallied as investors yanked money out of stocks.
U.S. Treasury prices edged up, with longer-dated bondssnapping a five-day losing streak as technology sharestumbled.
Benchmark 10-year note rose 3/32 to 96-6/32,yielding 5.51 percent, and 30-year bonds rose 3/32to 93-9/32, yielding 5.85 percent.
"Equities are trading weak again as investors unwind someof the big shift a couple of months ago out of fixed incomeinto equities," said John Roberts, head of government tradingat Barclays Capital.
Sun sank $2.48 to $16.20 after cutting its earningsforecast and warning that sales would be 10 percent or morebelow estimates due to economic weakness in Europe. Theannouncement trailed a report on Tuesday by Goldman Sachswarning the company may have trouble meeting estimates, whichdragged the tech group lower.