Nasdaq falls 51 for first loss in 5 sessions

Dip triggered by report on semiconductor firms

Dow up 31 in late surge

April 17, 2001|By BLOOMBERG NEWS

NEW YORK - The Nasdaq composite index fell for the first time in five sessions yesterday after a Morgan Stanley Dean Witter & Co. analyst said semiconductor companies are likely to reduce profit forecasts for the rest of the year.

Intel Corp. and Qualcomm Inc. led the decline, which drove down the index by 51.86, or 2.6 percent, to 1909.57.

Investors realize that "things can get much worse" after the report on computer-chip makers, said Michael Weiner, who helps manage $6 billion for Banc One Investment Advisors Corp. in Columbus, Ohio. "There's plenty of room to be disappointed" by technology companies' profits.

The Standard & Poor's 500 index fell 3.82, or 0.3 percent, to 1179.68 as financial stocks such as Citigroup Inc. and computer-related shares including Microsoft Corp. declined. First Union Corp. dropped after it agreed to acquire banking rival Wachovia Corp. for $13.4 billion in stock.

The Dow Jones industrial average erased a loss in the final hour of trading, rising 31.62, or 0.3 percent, to 10,158.56. Exxon Mobil Corp. had the biggest advance.

The Sun-Bloomberg Maryland stockindex, a price-weighted list of companies with operations in the region, fell 2.44 to 198.51. Ciena Corp tumbled $4.47 to $51.52. Human Genome Sciences Inc. fell $3.91 to $50.59.

Almost three stocks fell for every two that rose on the Nasdaq stock market, while four declined for every three that advanced on the New York Stock Exchange. about 897 million shares traded on the Big Board, the fewest this year.

Profits of technology companies are expected to fall 38 percent in the first and second quarters, according to First Call/Thomson Financial, suggesting to some investors that the Nasdaq's 14 percent surge last week was premature. The Philadelphia semiconductor index advanced 23 percent last week.

Overall, profits at S&P 500 companies are expected to fall 8.7 percent in the first quarter and 7.4 percent in the second-quarter, according to First Call. In the third quarter, analysts see a rise of 0.6 percent, while they forecast a jump of 11.7 percent yesterday in the fourth quarter.

Semiconductor stocks dropped after Morgan Stanley's Mark Edelstone said in a note to clients that the computer-chip business "will not improve much until the fourth quarter."

Intel, which is to report earnings today, fell $1.82 to $26.30; Broadcom Corp. lost $4.27 to $31.11; and Xilinx Inc. dropped 90 cents to $40.24. Edelstone lowered his profit forecasts for Intel for 2001 and 2002. He reduced Broadcom and Xilinx to "outperform" from "strong buy."

The decline in chip stocks spread to other technology companies. Microsoft lost $1.39 to $60.79, and Qualcomm declined $4.67 to $48.37.

Citigroup dropped 35 cents to $46.95 after the largest U.S. financial services company said profit fell 6.6 percent as the market's slump reduced its earnings from venture capital investments.

Juniper Networks Inc. fell $2 to $48.38. Morgan Stanley Dean Witter analyst Christopher Stix said the maker of equipment used to direct traffic on data networks was fairly valued because of uncertainty regarding sales over the next three quarters.

Other communications-equipment stocks also fell. Nortel Networks Corp., the biggest maker of fiber-optic equipment, dropped $1.35 to $15.25; and JDS Uniphase Corp., the biggest maker of fiber-optic components, slipped $1.89 to $19.90.

"There's a lot of negative sentiment," said Eric Effron, a manager of the $1.1 billion SU Aggressive Growth Fund. "Tech and telecom companies as a group have demonstrated themselves to be more vulnerable to the economy than investors previously anticipated."

Shares of oil companies that own refineries, including Exxon Mobil and Amerada Hess Corp., rose after gasoline prices increased to an almost nine-month high. Supplies of the fuel are expected to stay low as demand begins to strengthen ahead of the annual summertime peak, when drivers hit the road for vacations.

Exxon Mobil rose $2.55 to $84.55; Amerada Hess gained $3.78 to $84.69; and Phillips Petroleum Co. rose $1.49 to $58.09.

Oil exploration and production companies also got a lift. Anadarko Petroleum Corp. advanced $2.96 to $68.31, and Burlington Resources Inc. gained $1.97 to $48.15.

Eli Lilly & Co. advanced $1.56 to $79. Lilly said first-quarter profit rose 17 percent as sales of its Zyprexa schizophrenia drug jumped.

DoubleClick Inc. fell $1.58 to $10.43. The largest online advertising company forecast slower sales for this quarter and 2001. DoubleClick said Thursday that its first-quarter loss widened from a year ago.

AOL Time Warner Inc. gained $1.09 to $43.31 after the biggest Internet and media company said its America Online Internet service has more than 29 million customers worldwide, an indication that it gained 1 million subscribers in about six weeks.

Sierra Pacific Resources fell $1.21 to $13.29 after the owner of Nevada's two largest utilities canceled its May 15 dividend because it may need the money to buy higher-priced power.

The Russell 2000 index of smaller stocks lost 4.12, or 0.9 percent, to 450.90. The Wilshire 5000 index, the broadest gauge of U.S. stocks, declined 47.44, or 0.4 percent, to 10,805.21. The market value of U.S. shares dropped $54.6 billion.

Overseas, Japan's Nikkei stock average fell nearly 1 percent. European markets were closed for Easter Monday.

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