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Dow, Nasdaq Plummet Amid Earnings Worries

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RHONDA SCHAFFLER, CNN ANCHOR: Welcome back to MARKET CALL. We're looking at the Dow industrials off 2 3/4 percent. The Nasdaq is down 3 percent. A sell-off inspired by earnings worries.

Allan Chernoff is now going to help us crunch these numbers -- Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: OK, Rhonda, let's again point out the fact that this market is being driven up and down, up and down, relatively speaking, by moves in IBM and J.P. Morgan. So, you see the Dow off 272 points, now. And both of those stocks that I just mentioned, IBM, J.P. Morgan, both well off of their lows for the day. J.P. Morgan, in fact, had plummeted all the way down to 118. Right now, though, J.P. Morgan is trading at 120 1/2. IBM, the other situation here, is trading right now 95. The low of the day: 90 1/4.

Let's keep in mind, the Dow industrials composed of 30 stocks, so when two stocks in the Dow take a drubbing the way that those two are today, that has an incredible impact. Eight of the stocks in the Dow industrials right now are actually in positive territory. So, the damage is not nearly as severe as it could otherwise be.

Let's also talk about some of the sectors here. Yes, we are seeing move into defensive areas. The utility stocks doing well today, gold and silver. That would be expected. But also, very interesting, Rhonda, we have got some of the economically cyclical stocks rising. If the world were falling apart, if everybody was thinking, the economy is really plunging into a recession, we would not be seeing that. But today we are seeing forest and paper stocks, chemical stocks and oil stocks all rising. And that's extremely interesting here. It's not the sort of action you would normally see when the market is simply falling apart when everybody is worried very much about the future.

Rhonda, one other very important point here, a veteran trader was just telling me that we could see a lot of margin calls coming a little bit later today and that could drive some more selling. Margin calls being, when a person's portfolio, when the stocks in that portfolio fall to a certain point, if they bought on margin, basically borrowing from their broker, and if the stock falls below a certain amount, they've got to basically dump out of the stock to pay back the broker. So, those forced margins calls could actually push the market down if that happens later today.

But it's a real possibility, Rhonda. Something to watch out for.

SCHAFFLER: Could be an interesting afternoon. Thanks so much, Allan, for putting some perspective on this sell-off.

We want to talk about one company in particular. We're in the midst of earnings season. Xilinx beating expectations for the third quarter. The integrated circuit maker posted a profit of 32 cents a share, beating estimates by 2 cents. That was also more than double the year-ago quarter. Xilinx also turned in record revenues more than $437 million. Shares of Xilinx have suffered along with the rest of tech sector, pulling back from a 52-week high of 98. Right now, as far as how that stock is performing on Wall Street, we are seeing a bit of pullback. Not surprising, considering the tech down-draft.

Here to talk about their strong quarter is Chris Chelham (ph), chief financial officer at Xilinx.

Thanks for joining us.

CHRIS CHELHAM, CFO, XILINX: Good morning.

SCHAFFLER: I guess the main story for you is that revenues were just fine. That had been a concern on Wall Street a few weeks back.

CHELHAM: Yes, particularly in light of the fact that this is our summer quarter and Europe is traditionally slow for us. So, to put up a 20 percent sequential revenue growth, and Europe actually grew 15 percent, we were very excited about the strength we've seen in our business on a global basis.

UNIDENTIFIED CNN ANCHOR: Chris, what would you tell the investor who maybe didn't participate in -- heavily in technology, particularly, the Internets in 1999. They've seen the sell-off today. From your perspective your type of company, is it a time to really be loading up the boat on a stock like yours?

CHELHAM: Well, I'm obviously very bullish about the company. I think there's some significant trends that we are participating in. And our new product that we introduced about a year and a half ago, called the Virtex Family, is enjoying unprecedented success in the marketplace, essentially being driven by the communications revolution that's going on, because about 78 percent of our revenues this quarter actually came from the communications sector.

SCHAFFLER: Chris, just briefly, it's hard to top a good act. Can you top record revenues next quarter?

CHELHAM: We have given a guidance of approximately 12 percent growth. We are always a little bit cautious about the December quarter, because of the holidays that, you know, give us less shipping days. But, traditionally December been a good quarter for us.

SCHAFFLER: Chris Chelham, thanks so much, from Xilinx, for joining us.

What we want to do is go to the Nasdaq marketsite. We've been tracking the Nasdaq recover quite a bit. We're looking at about a triple-digit loss for the Nasdaq.

We want to check in with Charles Molineaux, though, to find out if Intel is helping stabilize things there -- Charles.

CHARLES MOLINEAUX, CNN CORRESPONDENT: It may indeed be doing some good, Rhonda. Actually, we're looking at the Nasdaq Composite now down by 105 points at 3108. If you take a look at the course that this market has taken so far, we did, in fact, appear to bottom out with a loss of 187 points at 3,026 and then bounce back up again.

But, something to keep an eye on, look at this. This is some green. It's the Philadelphia Semiconductor Index. It's not up by much. A little earlier it was up by almost a good one percent. But this is the chip stocks and they are actually seeing some strength, thanks, most definitely, to Intel, which is, right now, up about five percent.

If you take a look at the big caps you can actually see that we are seeing a dramatic performance by Intel, but that it is also a major exception. Cisco Systems, for one, is off by almost two dollars a share. Microsoft is also down sharply; Oracle and Sun Microsystems as well. But Intel does stand out as a pretty shining exception to the rule, putting in a nice rally after, of course, a stronger-than- expected earnings last night. Again, the caveat being those earnings had been -- earnings expectations -- had been tailored downward. But telecom is still off by percent. Industrials -- finance, rather, down by 3 1/2. Industrials down by three. Computers down by 3.2 percent.

We do have, Rhonda, one positive story, a very bright one shining out. MP3.com could actually have a new deal in its fight to stay alive. MP3 offers music downloads from a library of songs, which is supposed to consist of material that users already own. The company has agreed to pay $30 million to the National Music Publisher's Association. This is the latest in a series of agreements the company has been frantically striking with record companies. It's been facing grave threats to it's very existence after an April court ruling that it broke copyright laws by offering music for download.

So, here we do have some stocks moving up on very positive individual stories. This one up by 11 1/2 percent, or $31 a share. And then Intel, which is moving up on an individual story of its own and may actually be having broader effects, certainly on the semiconductors and possibly on the market itself, which is now down by 113 points. We had a session high of 3,121. That was still down by 92 points about 15 minutes ago -- Rhonda. But the breadth is still very negative, decliners ahead of advancers by about 6-1 still.

SCHAFFLER: All right, Charles. We knew you would find a bright spot, though. Thanks so much. We'll check back.

Meantime, we have got to go back to the big board where Christine watching the Dow come back from what was an early, more than 400-point plunge.

How is it looking now, Christine? CHRISTINE ROMANS, CNN CORRESPONDENT: It's looking a little better. I was just talking to somebody, Rhonda, who was over there in the thick of that IBM crowd and now says that the worst is over, that he expects IBM to trade between 94 and 96 for the rest of the day and that he's comfortable with the way the market feels right now. He said everybody here had a chance to really crash this thing this morning and they did it. They were given the opportunity and the market recovered. He said that's a good sign, although other traders standing around him were quick to point out the day is very, very young still.

But, lots of people trying to find a silver lining, even with the Dow down 285 points, the fact that it hit a new intra-day low for the year today still has people a little bit -- a little bit concerned. But, they say that the fact that the market was able to recover from its worst levels so quickly and the fact there's probably, what they call air, meaning that the market sells so quickly, there are probably pockets above these prices that still need to be tested. They say that maybe the worst is over for now. But they'll closely be watching any kind of collateral damage in IBM, J.P. Morgan and other Dow components to see if that spreads -- Rhonda.

SCHAFFLER: And Christine, before we let you go, just quickly, how would you describe the selling? Is it frenzied or orderly?

ROMANS: Now it is orderly. Before, it was frenzied, mainly in IBM. Now it's feeling much more orderly. There's actually buying popping up around here.

SCHAFFLER: All right, Christine, we'll check back with you. And we want to say farewell to our CNN viewers. We'll be, of course, keeping you posted on the markets throughout the day on CNN. For our CNNfn viewers, stay tuned, lots more MARKET CALL ahead.

DARYN KAGAN, CNN ANCHOR: And our thanks going out to Rhonda Schaffler and all the staff at CNNfn as we continue to, excuse me, follow the story of the stock market.

Once again, the latest numbers, the Dow down 283 points, Nasdaq down 106. Not pretty numbers, but certainly not the worst we've seen all day.

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