Averages Can’t Hold Gains

Averages can’t hold gains

More profit warnings add to worries

NEW YORK (CBS.MW) – The major stock indexes headed lower Wednesday,
easily relinquishing earlier gains as cautious buyers remained sidelined
in the midst of this challenging pre-announcement season.

The Nasdaq continued to hover at levels not seen since October 1998
while the Dow Industrials dipped into bear territory, falling 20 percent
from its all-time high of 11,750 reached in January 2000.

Checking sector action, tech stocks again led the decline, with
networking, chip and hardware issues pacing the downside. In sector
action, financial, biotech, insurance, utility and consumer issues
declined while paper, gold, chemical, natural gas and oil service stocks
faltered. View latest market stats.

“Since a lot of tech companies finalize sales in the last days
of any given quarter, it’s not surprising to see these warnings crop up
right now. The only surprising part of [the recent tech news] was
probably the magnitude of the earnings warnings. IT spending is falling
like a rock,” commented Louis Navellier of the Navellier
Performance Funds.

“There are very few sectors that are immune from selling right
now. Many investors are still selling stocks to pay for last year’s
realized capital gains. In addition, the margin investors are selling
whatever they can, even their good stocks, to meet margin requirements.
The best equities to invest in right now are the recession resistant
stocks that have low-to-moderate price-to-earnings ratios. The current
hot spots are consumer-related stocks, oil and gas stocks, and the
independent power producers,” Navellier added.

The Dow Jones Industrials Average ($DJ) lost 99 points, or 1.0
percent, to 9,385.

The Nasdaq Composite ($COMPQ) shed 29 points, or 1.8 percent, to
1,643 while the Nasdaq 100 Index ($NDX) fell 29 points, or 2.1 percent,
to 1,369.

Dragging the Nasdaq sharply lower were shares of Intel, off 5.5
percent, Dell Computer, down 5.3 percent, Qualcomm, off 5 percent, Sun
Micro, up 3.3 percent, and Applied Materials, off 4.7 percent.

The Standard & Poor’s 500 Index ($SPX) lost 1.3 percent while the
Russell 2000 Index ($RUT) of small-capitalization stocks gave up 0.3
percent.

Volume came in at 277 million on the NYSE and at 526 million on the
Nasdaq Stock Market. Market breadth was negative, with losers beating
winners by 14 to 12 on the NYSE and by 17 to 11 on the Nasdaq.

Pre-announcement flurries

Business-to-business outfit Commerce One rose 12 percent, climbing in
the face of bad news. The company (CMRC) warned that it now sees a
first-quarter loss from operations of 11 cents a share, blaming delayed
IT purchases. First Call/Thomson Financial had expected a loss of 6
cents a share.

Ariba (ARBA), which got clobbered Tuesday following a warning
announced late Monday, put on 7.7 percent.

Another downpour of warnings came in after the close Tuesday.

Rational Software (RATL) told investors it expects fourth-quarter
earnings-per-share of 20 to 22 cents vs. analysts’ previous expectations
of a 22-cent gain. Shares fell 5 percent.

Kana Communications (KANA) announced it would post a first-quarter
loss of 43 cents a share vs. the 19-cent loss that had been expected by
Wall Street. Shares tumbled 24 percent.

Clarus (CLRS) trimmed first-quarter revenue expectations but said it
expects a loss of 97 cents a share, in line with the Wall Street
estimate. The stock lost 2 percent.

And Sybase (SYBS) warned that first-quarter earnings will come in
between 23 and 26 cents a share, below the 28 cents that had been
expected by Wall Street. Shares fell 3 percent.

In other corporate news, American International Group (AIG) made a
$23 billion bid for American General Corp. (AGC) late Tuesday – topping
a bid from Prudential PLC last month. AIG would pay $46 per American
General in an all-stock deal.

Treasury focus

Treasury prices slipped, with losses clustered in the 30-year issue.

The 10-year Treasury note was off 7/32 to yield ($TNX) 4.96 percent
while the 30-year government bond gave up 11/32 to yield ($TYX) 5.50
percent.

In economic news, the NAPM non-manufacturing index for March will be
on. View Economic Preview and economic calendar and forecasts.

Meanwhile, Fed Chief Alan Greenspan is speaking on trade policy
Wednesday morning.

In the currency arena, dollar/yen lost 0.3 percent to 125.12 while
euro/dollar rose 0.8 percent to 0.9043.