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Date Posted: 22:13:17 11/20/00 Mon
Author: X
Author Host/IP: slip-32-100-192-117.in.us.prserv.net / 32.100.192.117
Subject: X

11/20/2000 Stocks Slump on Worries of Slowing Growth

By Elizabeth Lazarowitz

NEW YORK (Reuters) - Investors' worries that a slower U.S. economy may crimp the growth of high-technology companies, slammed the Nasdaq market to its lowest close in more than a year.

The continued U.S. presidential stalemate added to the gloom.

Fears about dwindling earnings at tech companies deepened after a major Wall Street brokerage, Morgan Stanley Dean Witter, cut its investment rating on a number of high-tech heavyweights, including Juniper Networks Inc. (NasdaqNM:JNPR - news).

``It's two-thirds earnings and one-third election,'' said David Sowerby, market strategist at Loomis Sayles.

``If you went back three months ago and looked at what earnings estimates were and what they are starting to look like today for both the fourth quarter and 2001, it is not recession. But, at least, it's an eye-opening reduction in earnings,'' Sowerby said.

The technology-laced Nasdaq Composite Index (^IXIC - news) tumbled 151.55 points, or 5.01 percent, to 2,875.64, to close at its lowest level since October 1999. It slid below the key 3,000 watermark for the third time this year, to close below that point for only the second time in 2000. The Nasdaq is down 29 percent for the year.

Blue chips also slid as investors punished Coca-Cola Co. (NYSE:KO - news), on news the world's No. 1 soft drink maker was bidding as much as $15 billion for Quaker Oats Co. (NYSE:OAT - news), which makes the sports drink Gatorade.

Coca-Cola slumped $4-7/8 to $56-9/16, a drop of nearly 8 percent. That helped drag the Dow Jones industrial average down 167.22 points, or 1.57 percent, to finish at 10,462.65, strapping it with a 9 percent loss for the year.

The Dow was hurt further by General Motors Corp. (NYSE:GM - news), which fell $4-5/16 to $51-9/16 after the company said it expects its U.S. November car sales to fall as much as 7 percent.

The broader Standard & Poor's 500 Index (^SPX - news) ended down 25.10 points, or 1.84 percent, at 1,342.62.

The lingering question of when the world will know who will be the next U.S. president also was still plaguing investors, with the electoral process already in its second week.

Florida's Supreme Court held a hearing on Monday, focusing on whether to allow votes counted by hand in three Florida counties. The Florida results are key to whether the Republican candidate, Gov. George W. Bush (news - web sites) of Texas, or the Democrat, Vice President Al Gore (news - web sites), will become the president-elect.

The technology sector's troubles deepened after Morgan Stanley cut its price target on Cisco Systems (NasdaqNM:CSCO - news) by $15 to $75 a share and downgraded its rating on rivals Juniper and Redback Networks (NasdaqNM:RBAK - news).

The downgrade sent a shudder through Internet infrastructure companies, which already have been suffering in recent weeks, and the selling bled over into the broader technology group.

``It is a universal dumping of anything that arguably has exposure to the economy or exposure to high multiples,'' said Arnold Berman, technology strategist for Wit SoundView, calling the Morgan Stanley note a big catalyst for the sell-off.

Morgan Stanley said it expects very strong results for the companies in the last quarter of this year, but added that the first quarter of next year may be more challenging.

``Given a high likelihood of a slowing economy (and) moderating demand from the service provider sector ... we see an increasing likelihood of deceleration going forward,'' Morgan told its clients.

Cisco, among the Nasdaq's most heavily traded stocks, dropped $1-1/2 to $51-1/4. Juniper plunged $32-1/2 to $121-7/8, and Redback fell $8 to $72-3/4.

Internet auction site eBay Inc. (NasdaqNM:EBAY - news) was another brand-name high-tech company that saw its shares slammed by an analyst's downgrade.

Lehman Brothers analyst Holly Becker cut her rating on the company's shares partly because she is worried its core business is slowing. eBay lost $8-15/16 to $34-1/2.

The American Stock Exchange's Internet Index (^IIX - news) dropped more than 7 percent after touching a new 52-week low.

Tech stocks also felt the heat from Nasdaq heavyweight Oracle Corp. (NasdaqNM:ORCL - news), which was down more than 14 percent on news that a top executive had left the software maker.

Oracle, the Nasdaq's most heavily traded stock, fell $4-1/16 to $24-3/4.

Veritas Software Corp. (NasdaqNM:VRTS - news) said on Friday that Gary Bloom, an Oracle executive vice president, would become its chief executive. Bloom is the second high-ranking executive to leave Oracle this year. Veritas fell $2-7/8 to $107-1/4.

``Over the next two or three weeks, we're going to have a clean-up of the techs, meaning the rest of the overvaluation, by and large, will be squeezed out of it,'' predicted Stanley Nabi, managing director at Credit Suisse Asset Management.

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