Nasdaq plunges record 7.6%

Impending ruling on Microsoft sparks slide of 349 points

Index closes at 4,223.68

Investors rush to buy blue chips, sending Dow up 300 points

Wall Street

April 04, 2000|By Bill Atkinson | Bill Atkinson,SUN STAFF

Worries over Microsoft Corp. and broader concerns over the technology sector sent the Nasdaq composite index plummeting a record 349.15 points yesterday.

At the same time, the Dow Jones industrial average shot up more than 300 points, in what an analyst called one of the most "bizarre" days on Wall Street.

Nasdaq, which is heavily weighted with technology stocks, suffered its largest point loss ever, sliding 7.64 percent to 4,223.68. The loss surpassed a 229.46 point decline Jan. 4.

Yet, the Dow rocketed 300.1 points, or 2.75 percent, to 11,221, as investors plowed money into the "Old Economy" stocks.

"This is an awful, severe shock [to technology investors]," said Neil Kilbane, portfolio manager for Victory Value Fund, a Cleveland company with $560 million in assets under management.

John Boo, senior vice president of Nasdaq trading at Ferris, Baker Watts Inc., the Baltimore brokerage, said the divergence was startling.

"We had stocks that were down about 25 points, and then we had a lot of financial stocks that were very strong. It was a total mixed bag."

Phil Rettew, senior market analyst at Merrill Lynch & Co. Inc., said he hadn't seen such a split between the two indexes since shortly after the stock market crash of 1987 when investors fled to blue-chip companies and shunned speculative stocks.

"When there is insecurity or fear, you get volatility," he said.

Investors feared the worst at the opening bell because negotiations between government lawyers and Microsoft fell apart Saturday.

Their worries were well founded. After yesterday's close, U.S. District Judge Thomas Penfield Jackson ruled that the software giant violated the Sherman Antitrust Act, and illegally tried to corner the Web browser market.

Microsoft's shares tumbled $15.375 a share, or 14.45 percent, to $90.875, erasing about $80 billion in market value. The stock was the most actively traded in U.S. markets, with 131 million shares changing hands.

Some investors are starting to wonder whether the high-flying Internet companies will live up to expectations since many still don't make money.

Boo of Ferris Baker Watts said that investors began shifting to banks and industrial companies a couple of weeks ago, and were dumping Internet stocks.

"The things that people just couldn't get enough of -- they are giving some of those things back to buy things that are just completely out of style," he said. "Anything that could be generally lumped into technology, people are sick of."

While some indexes swung wildly, the Standard & Poor's 500 stock index, a broad measure of the market's performance, remained calm rising 7.39 points to 1,505.97, and the New York Stock Exchange composite index climbed 11.96 to 659.66, within a point of its record high.

Meanwhile, the Russell 2000 index of smaller companies fell 23.05 to 516.04; the Wilshire 5000 index slumped 174.61 to 14,121.57; the American Stock Exchange composite index skidded 27.03 to 978.00; and the S&P 400 midcap index tumbled 19.24 to 480.45.

The Sun-Bloomberg Maryland index of the top 100 Maryland stocks sank 12.88 to 255.60. Two high-tech stars were hurt in the slide: Aether Systems Inc. dropped $27.50 to $154, and Ciena Corp. lost $12.25 to $113.875.

Advancing issues outnumbered decliners by a slender margin on the NYSE in trading of 1.2 billion shares. Decliners led by a 3-to-1 margin on the Nasdaq, where 2.1 billion shares traded.

Rettew of Merrill Lynch said Nasdaq's volatility should continue for the next several months. He expects investors to continue pumping money into shares of blue-chip companies, and dumping Internet stocks.

Some analysts said investors should have seen such a large drop coming because Nasdaq has climbed so far so fast, and yet suffered several steep losses in recent weeks.

"Knowing how strong Nasdaq has been -- this shouldn't have been a surprise," said Andy Brooks, head of equity trading at T. Rowe Price Associates Inc., the Baltimore mutual fund company. "Who didn't know there was a huge valuation gap between the new economy and old economy valuations?"

Blue-chip stocks drew most buyers. American Express Co. rose $6.5625 to $155.50, and J. P. Morgan & Co. shot up $10 to $141.75.

Home Depot Inc. climbed $3.25 to $67.75 and Merck & Co. Inc. gained $4.625 to $66.75.

Citigroup Inc. gained $2.0625 to $61.9375, Bank of America Corp. rose $3.0625 to $55.50, and Fleet Boston Financial Corp. gained $3.5625 to $40.0625.

International Business Machines Corp. bucked the trend among computer-related companies, rising $3.875 to $121.875 after the No. 1 computer maker said it perfected a way to make chips that are 30 percent faster than current models.

Another exception to the high-tech slide was VA Linux Systems Inc., which makes software that competes with Microsoft's Windows operating system. VA Linux shares rose $1.9375 to $62.3125.

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