Skip to main content /BUSINESS

Mideast bombing sparks Wall St. selloff

NEW YORK (CNN/Money) -- Stocks tumbled Wednesday as news of more violence in the Middle East thwarted an attempt by investors earlier in the session to shrug off some dismal technology reports.

The Dow Jones industrial average fell 144.55 points to 9,561.57, a loss of 1.5 percent; it was up about 27 points before word of another suicide bombing -- the second in two days in Jerusalem -- came at midday.

The Nasdaq composite slid 46.13 to 1,496.83, a 3 percent drop that left the index its lowest close since Oct. 2. The Standard & Poor's 500 fell 17.15 to 1,019.99, a loss of 1.6 percent.

Peter Doyle, chief investment strategist at Kinetics Mutual Funds, said taking into account international tension, accounting issues and stock valuations, shares are likely to keep moving lower.

"All those things combined, it's hard to see where the market's going to move higher," Doyle told CNN.

Stocks had been trying to climb back into positive territory despite warnings from key companies in the technology sector. But sentiment turned sour on news of the second apparent suicide bombing in Jerusalem in two days. Israeli authorities said the bomber set off a blast at a bus stop, killing six people and himself, and injuring 40 others.

A second wave of selling hit stocks in the afternoon on the news that Israeli helicopter gunships fired on targets in Gaza City and Khan Yunis in southern Gaza.

"The latest news of the missile strike in Gaza pulled the legs out from under buyers," said David Briggs, head of equity trading at Federated Investors. "They stopped buying today and the market just pulled back."

Larry Wachtel, market analyst with Prudential Financial, said the market may be seeing more volatility because of Friday's "triple witching," when the contracts for stock index futures, stock index options, and stock options all expire.

Wachtel said triple witching traditionally causes volatility on Friday, but with more sophisticated trading, "some of the implications of triple witching are being felt now."

Struggle for semiconductors

The chip sector was especially hard hit after Advanced Micro Devices (AMD: down $1.60 to $8.70), the No. 2 maker of semiconductors, lowered its sales forecast and said it faces a substantial operating loss in the second quarter because of broad weakness in the personal computer market that cut into the company's business. UBS Warburg downgraded the stock to "hold" from "buy."

Intel (INTC: down $1.93 to $20.09) followed its rival lower, and pressured the Dow.

Chipmakers were pressured further after announcements from Micron Technology (MU: down $3.52 to $20.08), South Korea's Samsung Electronics, and German firm Infineon Technologies (IFX: down $0.87 to $14.91) that the Justice Department is probing possible anticompetitive behavior among dynamic random access memory chipmakers.

And computer memory-maker Rambus (RMBS: down $2.31 to $4.12) fell on news the Federal Trade Commission will file antitrust charges against the company. Rambus said the charges stem from the same allegations and facts which are currently being litigated in a number of private lawsuits.

Weakness also spread to computer hardware. Apple Computer (AAPL: down $3.03 to $17.12) warned that sales and profit in the quarter ending this month will fall short of forecasts as the slowdown in new computer spending proves persistent. IBM (IBM: down $2.59 to $73.35), a Dow component, traded below $75, and Dell Computer (DELL: down $1.98 to $24.73) also struggled.

"If (these warnings don't) wake up people that we're in preannouncement season and the preannouncements are going to be bad, I don't know what will," said Timothy Ghriskey, president of Ghriskey Capital Partners.

There was a mixed message in business software maker Oracle's much-anticipated earnings report. Oracle (ORCL: down $0.18 to $8.80) announced profit and revenue that were down from a year earlier but still above Wall Street's expectations. However, executives lowered their profit targets for the current quarter and said they expect weakness in corporate technology spending to linger at least for the remainder of this year.

Dow component Microsoft (MSFT: down $1.63 to $54.36) also fell.

And a bad day in techs wouldn't be complete without some trouble among telecoms. Communications equipment maker Ciena (CIEN: down $0.44 to $3.96) said late Tuesday that its fiscal third-quarter revenue may not meet expectations, even after the merger with ONI Systems is completed this week. Credit Suisse First Boston reduced its 2002 and 2003 sales estimates for Ciena and also cut its price target on the stock to $9 from $12.

"We have a changing of the guard in technology," said Charles Payne, CEO of Wall Street Strategies. "All these cornerstone tech names can't conjure up the magic they once did and I think it's time people started looking for new bellwethers."

One of the few bright sectors was home-building stocks, led by Lennar (LEN: up $1.88 to $59.18) which reported second-quarter earnings that handily beat expectations and boosted its earnings forecast for 2003.

Impact around the world

The tech warnings and the Mideast developments reverberated throughout the world. Asian-Pacific and European markets finished lower.

The bad news for stocks helped lift Treasury prices, sending the 10-year note yield down to 4.72 percent from 4.84 percent late Wednesday. The dollar slid against the yen and hit a 17-month low versus the euro.

Light crude oil futures fell 11 cents to $25.58 a barrel in New York, where gold rose 60 cents to close at $320.30 an ounce.

Market breadth ended negative. On the New York Stock Exchange, losers beat winners by about 5-to-3 as 1.27 billion shares changed hands. On the Nasdaq, decliners beat gainers by more than 2-to-1 on volume of 1.69 billion shares.

"The real players are still not playing in the marketplace and I think the (low) volume is indicative of that," said Mark Donahoe, institutional equity trader at U.S. Bancorp Piper Jaffray.




Back to the top