Cisco Carpet Bombed
Spurred on by a Cisco downgrade and negative tech comments from Merrill
Lynch, the Nasdaq sank 7.1% Wednesday to lows not seen since early 1999. The
index gapped down at the open, sank throughout the day, and finished near its
low of the day. The Dow and S&P 500 fared better than the Naz but still lost
2.5% and 3.1%, respectively.
With today’s decline, the Nasdaq finds itself 55% off of its March 10 high
and down about 45% on a year-to-date basis.Â
Nasdaq volume surged 20% above Tuesday’s levels, as a whopping 2.8 billion
shares changed hands. NYSE volume increased by about 10%, as 1.43 billion shares
traded.
Analysts commented that they currently see very few reasons for buyers to
step in now as market participants continue to fume over the Fed’s decision not
to cut rates on Tuesday. Several mentioned, though, that a rate cut had actually
been unlikely.
“The Nasdaq collapse really is more a reflection of the disappointment
that investors have in the Fed because they did not cut interest rates. I’m
actually surprised that they are disappointed because we really did not expect
the Fed to cut interest rates,” said Sam Stovall, Senior Investment
Strategist, Standard & Poors.
“We figured that they probably would embrace a neutral or an easing bias
but would likely not be cutting rates until their January 30-31st meeting. So,
in some ways investors are getting a little bit ahead of themselves in terms of
what the Fed is going to be doing, and as a result they’re getting
disappointed,” he added.
According to preliminary numbers, the Nasdaq fell 178.78 to 2332.93, the Dow
lost 265.44 to 10,318.93, and the S&P 500 slipped 40.86 to 1264.74.
Top sectors were gold and silver
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up 0.2%, and drugs
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On the downside were computer technology
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Bloodied by the Merrill Lynch comments was tech bellwether Cisco
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which fell 5 1/4 or 13% to 36 1/8. Merrill cited the possibility of a larger-than-expected slowdown in IT spending in 2001 as the reason for the cut.
The Dow winners reflected the shift toward defensive issues. Top Dow stocks
were Phillip Morris
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Merck
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The biggest dogs in the Dow were Microsoft
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AT&T
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PowerRating), down 7.9%.
Looking ahead, the third quarter GDP report will be released on Thursday at
8:30 AM ET, and analysts expect a 2.4% rate of growth.