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Monday March 12 2:51 PM ET Wall Street Takes Another Beating

By Haitham Haddadin

NEW YORK (Reuters) - Stocks were still bleeding in late afternoon trading on Monday, with the Nasdaq composite index pinned below the key 2,000 level after Internet gear giant Cisco Systems Inc. hit the market with big job cuts amid a weakening U.S. economy.

Technology sector investors were also spooked after Sweden's Ericsson, the world's third biggest mobile phone maker and leading network infrastructure supplier, added its voice to the corporate chorus of gloom. Ericsson warned of a quarterly loss, and its stock and those of rivals like Nokia Corp. , the mobile phone titan, fell.

``It's very much all the same song with a different verse,'' said Bill Meehan, chief market analyst at Cantor Fitzgerald, who is in the camp that sees Nasdaq plunging much further this year as the corporate earnings picture turns bleaker.

The tech-laden Nasdaq index, which exploded to a record high of 5,048.62 a year ago on March 10, fell 73.66 points, or 3.59 percent, at 1,979.12, with four stocks down for every one that rose.

The losers included most of Nasdaq top tier names, but the index was off its lowest levels for the session that took it down more than 5 percent, thanks to strength in the shares of companies in the computer chip making business.

The blue chip Dow Jones industrial average plunged 237.6 points, or 2.23 percent, to 10,407.02. The broader Standard & Poor's 500 Index fell 31.68 points, or 2.57 percent, to 1,201.74. On Friday, the S&P closed at a nearly two-year low.

More than 270 stocks hit new lows on Nasdaq, including Cisco, the world's top maker of networking equipment for the Internet, which dropped $1-11/16 to $18-15/16 and was the most active on that market. The stock slid to $18-3/8 early in the day, its lowest level in more than two years.

Late on Friday, Cisco Chief Executive John Chambers said the company's visibility is very limited and that he sees signs of the U.S. economic downturn beginning to spread slightly into other global regions. Chambers cited a better than a 50-50 chance that the slowdown in demand and capital spending by customers is going to be more than a six-month phenomenon.

``It's pretty clear the Cisco news has shaken people up even further,'' said Graham Tanaka, president of Tanaka Growth Fund, which manages $200 million. ``This is because John Chambers made the comment that the slowdown in capital spending could extend beyond two quarters. In the past, you had corrections that might normally last only a couple of quarters.''

The last time the Nasdaq traded under the 2000 mark was Dec. 16, 1998, and the last time the once mighty index closed below 2000 was Dec. 14, 1998.

The Nasdaq now is down more than 60 percent from its March 2000 high as profit warnings mount in the flagging economy. That drop surpasses its drubbing of 59.9 percent during the 1973-74 prolonged bear market.

All but four of the 30 stocks in the Dow were down. The ones in the positive column were consumer products giant Procter & Gamble, telephone company SBC Communications, automaker General Motors and computer maker Hewlett-Packard Co., the last shedding early losses.

Cisco's rival Juniper Networks Inc. fell $3-7/8 to $51. Jabil Circuit Inc. shed $2.55 to $20.95 after UBS Warburg cut its rating due to weakness in Cisco, its largest customer.

The short-lived improvement in the Nasdaq in afternoon trading was pegged to strength in semiconductors, Cantor's Meehan said.

``People are keying off the semi-conductors as a leading indicator. Anytime you see some kind of bounce in the semis, you get people covering,'' he said. ``It's just the expectations that long-term fundamentals for the semis are still pretty positive but there's an inventory correction to go through.''

The Philadelphia semiconductor index rose 1.47 percent, reflecting gain by chip equipment maker Applied Materials, up $1-13/16 at $48-9/16.

Among issues that rebounded was Sun Microsystems, up 1/2 at $17-15/16 in heavy trading. The network computing giant had fallen to a new low at $16-1/2.

However, other leading tech sector indices were down sharply, with the S&P computer networking index grouping Cisco and others losing 7.74 percent. The S&P communications equipment index was off 6.13 percent and S&P computer software index 4.82 percent.

Adding to the sour mood, Ed Kerschner, UBS Warburg's chief portfolio strategist and Wall Street's No. 1 rated strategist, cut his 2001 earnings outlook for companies in the Standard & Poor's 500 Index by 3.5 percent because of a drop in manufacturing activity and cuts in corporate spending.

Bear Stearns chief economist Wayne Angell said the Federal Reserve (news - web sites) will likely only cut interest rates by 50 basis points at its next policy meeting March 20, adding that would still leave the U.S. central bank well behind the curve.

Tanaka agreed and said the U.S. central bank needs to lower short-term interest rates by another full percentage point to even become modestly stimulative to the economy.

-- Rachel Gibson (rgibson@hotmail.com), March 12, 2001

Answers

What a Crock! So many words, so little insight. !. Where was the Plunge Protection Team? For the first time in the past year or so, the market has not experienced a miraculous recovery in the last hour when the Dow dipped 300! Where is the wizard, the wonderful wizard of Wall Street, Alan of Greenspin? Has he decided to go back to playing the clarinet? Maybe he should. 2. No mention of how companies "cooked the books" to get those inflated stock prices. A recent Gold-Eagle guest editorial spells out the ways (five) earnings were doctored to rope in the suckers. 3. No mention either of how effective interest rate cuts by the Federal Reserve are really likely to be. Japan is enjoying 10 years of recession with interest rates at 0.15%. We have quite a ways to go. 3. Surprised the "big Bush tax cut" wasn't trotted out as a panacea. If stealing less from the productive in a time of economic malaise is good, why isn't it good all the time? Congress didn't ask the Wizard that one. The hearing ran out of time before Ron Paul got his turn! 4. Oh yeah, and what pray tell, is likely to happen when the Japanese, desparate for cash to sustain their economy, remember about all those US Treasury Bonds they hold? Look out Chicken Little, maybe the sky is falling!

-- Warren Ketler (wrkttl@earthlink.net), March 12, 2001.

Ericsson had supply problems last year.
Lack of parts for their mobile phone
bottlenecked production.

-- spider (spider0@usa.net), March 13, 2001.

Ericsson Loss Warning Adds to Telecom Woes

But Ericsson's troubles are further-reaching.
The company also cited slowing demand in
Western Europe, as that market hits saturation,
and bloated inventory levels that are clogging
the industry's supply chain worldwide -- issues
that portend further disappointments for all
players.

. . .

The unit lost $1.7 billion last year, as the
company struggled to refine design and supply
problems.

-- spider (spider0@usa.net), March 13, 2001.