Hit with a mid-morning warning from Corning, Inc. (NYSE: GLW) that sales for the first half of the year will be slower than previously thought, U.S. technology stocks took a tumble Thursday, with the Nasdaq Composite Stock Index losing more than a quarter of its 2001 gains.
Fiber optic and computer component shares were affected most directly by Corning’s announcement. The Nasdaq, which in 2001 had risen nearly 400 points, or 15.7 percent, gave back 104.87 to close at 2754.28.
The E-Commerce Times Index fell more than 6 percent, as declines in Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY) offset a 41.8 percent gain posted by Webvan (Nasdaq: WBVN).
Stocks were not helped by remarks from U.S. Federal Reserve chairman Alan Greenspan, who gave no hint about interest rates in congressional testimony Thursday morning.
Waiting on the Fed
Greenspan reportedly told the U.S. Senate Budget Committee that tax cuts could benefit the economy in the event of a downturn, but left investors without an indication of the Fed’s next move. Lower interest rates would help boost technology stocks, because companies would have easier access to capital to invest in hardware and software.
However, while Greenspan’s testimony provided no specific clue on rates, reports said that the Fed chief, when asked whether the economy is in a recession, responded that growth is likely “very close to zero,” with inflation pressures under control.
Those reports helped steady stocks by providing support for theargument that the Fed may deliver a big rate cut after its policymakingcommittee finishes a two-day meeting next Wednesday.
Investors See Hurdles
Corning, which reported fourth-quarter results that topped analyst estimates, said the outlook for the first quarter ending in March may not be so bright. The company lowered its outlook for sales and earnings, citing expected weakness in the telecommunications market.
The tech-heavy Nasdaq displayed little upward mobility in the early morning, then went on a steady slide for the rest of the day, led by declines in Oracle (Nasdaq: ORCL), Cisco Systems (Nasdaq: CSCO) and JDS Uniphase (Nasdaq: JDSU). The Nasdaq had been riding a three-day winning streak through Wednesday.
JDS Uniphase, a supplier of optical networking products, was hit by reports of a Salomon Smith Barney downgrade and by the delay of a planned shareholder vote on the acquisition of optical communications firm SDL, Inc. (Nasdaq: SDLI). JDS Uniphase closed at US$55.19, down 12.5 percent.
Oracle closed down 13 cents to $29.34 and Cisco fell $3.25 to $39.31.
In the e-commerce sector, online grocer Webvan rose 23 cents to close at 78 cents after the company said it will “dramatically reduce” costs in order to conserve cash. The company said it will delay expansion into several U.S. cities, and may cut additional jobs.
Webvan is hoping to get its stock price over $1 to avoid delisting by the Nasdaq.
E*Trade (Nasdaq: EGRP) benefited from a better-than-expected quarterly earnings report to rise to $14.67 at midday, as the online brokerage reported a profit from ongoing operations for the first quarter of fiscal 2001, beating analyst estimates by a penny per share. By the end of the day, however, E*Trade had fallen 3 cents to $13.94
Amazon fell $2.88, or 13.1 percent, to close at $19, while eBay tumbled $4.56, or 8.4 percent, to finish at $49.81. eBay is still up 50.9 percent for the year.