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Dow Drops Below 10000; Nasdaq Plunging Toward 3000

Aired October 18, 2000 - 9:59 a.m. ET


BILL HEMMER, CNN ANCHOR: The big story at this time, the markets on Wall Street. They continue to take a dive at the moment.

DARYN KAGAN, CNN ANCHOR: That they do. Looking at our latest numbers, the Dow has come back a bit. As we were saying, all relative, looking better at being down 307 points. Nasdaq also down significantly, 138 points down so far. Trading has been open about a half-hour so far.

HEMMER: And again the benchmarks we are watching the 10000 on the Dow, that has been broken; the Nasdaq 3000 mark not broken yet. It may not. We'll track it.

Let's join our sister network now, CNN Financial News, in progress


RHONDA SCHAFFLER, CNN ANCHOR: We have seen the markets, though, recover. The Dow industrials at one point dropping more than 400 points. And much of that has to do with IBM, which is a company that reported earnings, revenues a little bit disappointing. The saying on Wall Street is, as IBM goes, so goes the market, and we're seeing that.

We will be bringing you continuous coverage from both the big board and the Nasdaq marketsite on this sell-off. In fact, what we want to do right now is get to the floor of New York Stock Exchange where we've got Linda Jay of RPM Specialist standing by. And we want to ask her as far as who the sentiment is going.

We've seen a lot in the past with market sell-offs, a lot of what goes on that's very important is investor psychology. Earlier when we checked in with Christine Romans, we did not see any sort of panic selling there, but let's get a confirmation on that.

For that, we turn now to Linda Jay.

Hi, Linda.

LINDA JAY, RPM SPECIALIST: Hi, Rhonda. How are you?

SCHAFFLER: Pretty good. Linda, this is a rough one down there. Tell us the latest. JAY: Well, I'll tell you, we're rallying nicely off the lows. It's not -- you know, a lot of people are saying that market bottoms are found when we fall off a cliff, which we, in fact, did this morning. A lot of that was due to IBM and J.P. Morgan, obviously. But the market has rallied off its lows. And, you know, there's a lot of talk and sentiment now that perhaps we may have finally found the bottom.

SCHAFFLER: Linda, one way to confirm that, some people say, is that volume will get very heavy. Is volume, do you think, heavy enough right now to think that all the sellers are out of the market?

JAY: Well, the volume is actually very heavy. We're up over 200 million already. More importantly, here's the thing: If we do have a midmorning rally, perhaps recover even more of these losses, the volume is key. If the volume on the way up is heavier than the volume on the way down, it's for real. So that's what we need to watch.

SCHAFFLER: Linda, can you give us any idea if it's the institutions selling today or if it's some of the investors who watched their 401(k)s shrink so much this year?

JAY: Today I think it was a lot of institutional selling. When you have names like IBM and J.P. Morgan disappoint, these things have to come off the lists. Now, these portfolio managers, that's what happened in the case of Intel and Apple. So I think that's what a lot of the selling was this morning. But, on that same note, we're going to need those institutions to come in here and buy this market now. That's where the volume's going to come from.

SCHAFFLER: That's what sort of troubles me right now -- and I'm looking at the market -- because decliners are simply swamping advancers. So if people are getting rid of the IBMs of the world and the Apples, what, if anything, are they buying?

JAY: Well, the drugs are holding up. I mean, I don't really know that anybody's buying much of anything today, except, you know, except you have your bottom fishers. I mean, you do have buyers, you know, in J.P. Morgan and IBM, and hopefully they're picking up some cheap stock. Hopefully for all of us they're picking up some cheap stock. But, I mean, the drugs are hanging in there, so I don't know. I mean, these thing have to recover. The financials opened horribly this morning. They started a little bit of a recovery. If the financials recover, if the brokers recover even some of this loss, you know, I think we'll be OK. But, again, volume is key.

SCHAFFLER: All right, Linda Jay, thanks so much...


SCHAFFLER: ... for taking time out of what's shaping up to be a busy morning on the big board.

Next we want to go to the Nasdaq marketsite where Charles has been tracking this sell-off. The Nasdaq, too, is coming off its lows for this session, but, Charles, we're looking at, again, very negative breadth. So it tells you a lot of stocks are under pressure today.

CHARLES MOLINEAUX, CNN CORRESPONDENT: Yes, the overwhelming majority of stocks in the Nasdaq, Rhonda. We've got the decliners ahead of advancers by pretty much what we were seeing earlier: a 6-1 margin. Actually, more along the lines of 13-2, which is even worse.

But check it out: We're off by 131 points right now at 3082. We have actually, at least for the time being, appeared to have bottomed out and bounced back up again. Look at what happened: We started off, again, down steeply and continued losing ground. We actually got pretty close to the 3000 level at 3026. That was a gain -- a loss, rather, of 187 points. We have now bounced back off of that, but we are still looking at some very steep selling on very atrocious breadth.

Check out our big cast, because Intel, again, is gaining after it did post earnings better than expected. Of course, those expectations had been tailored down by a warning from Intel, but at the moment it's up by 6 percent. But Cisco Systems is down by 4 1/2. Microsoft, which is going to roll out its earnings tonight, is down by 3 percent. We got Oracle down by 6 1/2, Sun Microsystems down by 5 1/2. And take a look at some of these sectors: We've got telecommunications now down by 6 percent, industrials down by 4 percent.

Chip stocks yet again lose ground. Yes, we're seeing strength in Intel, but the rest of the sector is looking awful. The Philadelphia semiconductor index is now down by 3 percent. And Internet stocks are getting pulverized. The Goldman Sachs Internet index is now down by 8 percent on the day.

So the selling is very broad. All the official Nasdaq sectors are down and down hard. While we see the Nasdaq is off by 128 points, we are continuing to gain a little ground from those lows. Was this that bottom that Linda talked about? Quite possibly, because we're also looking at very busy volume, 390 million shares traded. That's extremely active for just about 35 minutes into this trading day, Rhonda.

SCHAFFLER: Charles, do you think Intel has the potential to turn that market around entirely? It's a tall order today?

MOLINEAUX: It is a very tall order, and it is just one company. Its earnings, of course, were -- the expectations had been tailored downward. They were better than expected, but then those expectations have been tailored downward. And it comes in the midst of a whole series of other earnings announcements.

Check out what some of these sectors are doing on the Nasdaq. The telecoms are by far and away the worst of the Nasdaq sectors, down by 6 percent. But industrials are close behind, loss of 4 1/2; financials as well. Computers down by 4 percent, banking stocks down by 2 percent. And of course there is no Nasdaq Internet index, but the Goldman Sachs Internet index is down by 8 percent, so we see some pretty broad selling, Rhonda. This is all-encompassing.

Intel could conceivably -- again, it is the biggest of the chipmakers and it is considered a bellwether. It could provide some positive air into this overwhelmingly negative market. But, again, it is only one earnings announcement in the midst of a whole lot of them. If it were another company like, say, Oracle, reporting its earnings almost in a vacuum away from the calendar of the other stocks, that might be one thing. But all eyes, I think, are going to be on what Microsoft has to say tonight. And if that's positive, that might help a lot. But all by itself, I don't know about Intel.

SCHAFFLER: All right, Charles. We'll, of course, check back with you.

In the meantime, let's go to Christine Romans at the New York Stock Exchange and just continue to track this someone of a comeback here from the lows for the Dow -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Hi there. It is somewhat of a comeback. Traders are pointing out, Rhonda, that this feels like there were a few stocks that were bearing the brunt of all this bad sentiment, and that sentiment sort of spread out into some other sectors -- sectors and stocks which normally wouldn't be hurt but were falling one, two, three, four points in sympathy with this bearish mood on Wall Street.

The Dow now down 282 points. One trader pointing out it fell, at first slicing through these support levels, like a hot knife through butter, they said, down 150 points, 250 points, 350 points without much support at all. They say that perhaps that means the market could bounce up and trying to test some of those downside levels that they went through just like air. So that's what we're watching here right now to see what happens.

It doesn't feel like all that much panic or anything at this point. But when you look over at the IBM post, Rhonda, it is unbelievable. There are a lot of folks over there. Some pretty frenetic, frenzied action over by IBM. Seems to be the fulcrum of all that we're seeing here today, Rhonda.

SCHAFFLER: Christine, one thing about this sell-off -- and you alluded to it -- typically when you have a huge market sell-off, the market does continue to hit lower lows. Is there any sense, by looking at the futures, perhaps, when that might come again if it does?

ROMANS: It's interesting because futures were down their initial 35-point limit. Now they're down 21 and change. So the futures have backed off some of their worst losses as well. Sometimes that can be a good indicator. Also, it looks like futures are trading right around fair value right now. They had been even a little bit higher than fair value.

So folks are definitely zeroing in on the action out in Chicago, the futures action trying to get any kind of indication about what could happen next. The conclusion they're drawing now is that things look pretty stable at a 268-point deficit, Rhonda.

SCHAFFLER: All right, thanks so much, Christine. We'll check back with you.

In the meantime, we get some expertise now from David Sourby (ph), who is watching the losses total up here on Wall Street.

And it's one of these mornings we're watching closely volume. We're looking at the indices bounce back, which could be a positive sign. But I'm thinking that high volume might be the most positive sign. If we're getting a washout, that would be the way to tell.

UNIDENTIFIED MALE: For the person who adheres to technical analysis, you want volume to help gain momentum back.

SCHAFFLER: Because all of the sellers are out of the market, then.

UNIDENTIFIED MALE: Absolutely. The people who have panicked are done, now people are coming in and buying on the dips. And we've been conditioned in the last 10 years that when which buy on the dips, on 15-percent dips, we're happier six months later. And I'll stick with that. I think we're going to be much happier six months later.

SCHAFFLER: We certainly can't get more unhappy, I think. All right, David, we'll check back with you.

One company we've been talking a lot about today is Intel. It is shrugging off this widespread sell-off, up about 2 points right after beating lowered expectations.

Joining us from San Francisco with some perspective is Charles Glavin, technology analyst at Credit Suisse First Boston.

Charles, it's good to see you today.


SCHAFFLER: Let's talk a little bit about the fact that Intel is managing to buck the trend. Does that mean that the Intel turnaround is about to happen?

GLAVIN: Well, I think there's still some visibility issues in regards to Intel. Our downgrade today was actually more of a follow- up to an earlier piece that we wrote about some issues that Intel, we think, has to address. A large overbuild in processors, probably over 2 million excess Pentium III processor, are lingering out there. You saw a very aggressive price cut on Monday from Intel to try and flush that out. They have some manufacturing issues which they need to resolve. And they're going to be relying on a Pentium IV chip due out on November 20 that is not optimized for the process technology that is. In other words, it's too big for what it's supposed to be made on now and is more optimized for mid next year.

So what we're looking for is better visibility. And it's still down about 6 percent from where we -- our first note was. UNIDENTIFIED MALE: Charlie, it's World Series time and we want to know what the often cyclical semiconductor stocks -- is it the sixth inning or is it the ninth inning for these stock here in the near term?

GLAVIN: Well, I won't be a Clemens and throw any bean balls at anybody, but in regards to the situation, I think it depends on the sector. In the communications sector overall, which we tend to focus in on more specifically, we think that, yes, you may be in the fifth or sixth inning, but the question is, is it a double header in that case?

As far as some of the more cyclical stocks, I think what you're seeing right now is more of an inventory overcorrection -- or correction in regards to some overexuberance in regards to forecast numbers. In the case of Intel, they had very, very strong growth expectations for Europe and they hit a wall very hard in September. Also with some of handset manufacturers you've seen that. We also had to take down RF Micro Devices today too. But in both cases over the next 12 months, we're bullish on the stocks. It's over the next quarter or two that the visibility is something that we're more worried about.

SCHAFFLER: Charlie, you've got a buy rating on the Intel still. If you've been holding onto this stock and just watched it really plummet over the last couple of weeks, should you feel good about things at the moment?

GLAVIN: It depends on your time horizon, Rhonda. If you're looking at more of a 12-month horizon, we'd say hold onto it. It's rough waters between now and then. And, actually, we were looking for this at the beginning of the summer. We were warning people that this was going to be a Bette Davis summer. You know, buckle yourself in, it was going to be a bumpy ride. Boy, what a ride we've had. But the longer you hold out on this the more bullish we are on the general trend within technology. But the question is getting from here to there.

Near term over the next quarter, there's still got to be a flushing out that's got to occur in a couple different sectors.

SCHAFFLER: All right, Charlie Glavin, Credit Suisse First Boston, thanks so much for joining us with your thoughts on Intel today, now rating that stock a buy.

Stick around. There's lots more market calls straight ahead.



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