Techs Walloped
The New Year got off to a terrible start for technology stocks Tuesday as the
Nasdaq suffered a 7.2% trouncing led by freefalls in the once trustworthy
big-cap tech names like Cisco and Qualcomm. The Dow and S&P 500 fared
better, but still posted losses of 1.3% and 2.7%, respectively.
One positive note for the Nasdaq was that it was able to close about 3 points
above its December 21 low of 2288.16. Volume, unfortunately, was fairly light,
as just 1.90 billion shares changed hands on the Nasdaq and 1.10 billion shares
traded on the NYSE.
The tech wreck occurred despite some extremely weak economic data that shows
an economy screeching to a halt faster than most analysts had expected.
In economic news, the National Association of Purchasing Managers Report for
December came in at 43.7, which was significantly below the 47.0 that analysts
had expected. Any reading below 50 suggests an economic slowdown, so Tuesday’s
report makes a solid case for the Fed to act swiftly to cut interest rates.
“Everyone is looking for the low in tech. Everyone wants to buy tech,
mind you, while there’s still money to be made elsewhere. Tech is down a lot and
could rally anytime, at least temporarily. But if you want a sobering thought,
think about what a good low really looks like. A major low looks like the low
last March in Old Economy stocks,” said Frank Gretz, Market Analyst,
Shields & Co.
“Remember last March? Value managers were dying – – value funds had
redemptions, Tiger Fund went out of business. You were a fool to be buying a
food or even a drug stock. Old Economy stocks were so out of favor that everyone
sold them and that, by definition, is what happens at a major low. When will
tech bottom? As much as tech has declined, they’re not laughing at Cisco
yet,” he added.
According to preliminary numbers, the Nasdaq lost 178.65 to 2291.87, the Dow
slid 140.70 to 10,646.15, and the S&P 500 dropped 37.01 to 1283.27.
Top sectors avoiding the tech wreck were integrated oils
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1.3%, gold and silver
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0.2%.
Hammered were computer technology
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down 7%, and Internets
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Hit hard was tech bellwether Cisco
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33 5/16, its lowest level since October 1999.
Also whacked was Qualcomm
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heavier-than-average volume.
Among the day’s standouts was Philip Morris
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3/16 to 46 3/16 and established another new two-year high.
Joining Philip Morris to lead the Dow were AT&T
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Communications
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Looking ahead, November’s construction spending report will be released at
10:00 AM ET, and analysts expect a 0.2% increase. Traders will be watching to
see if the report will come in weaker-than-expected as the NAPM did Tuesday.