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Wall Street remains down by midday
By Mary Chung and Elizabeth Wine
Published: February 24 2003 16:24 | Last Updated: February 25 2003 18:13
A broad sell-off in US equities led by weakness in the technology sector pushed stocks sharply lower for a second straight day as the major indices lost about 1.5 per cent by midday.
"I don't see any sector doing well, even defensive issues are performing poorly. Consumer goods have been hurt by the drop in sentiment and there is just a lack of buying, which is leading the market to retest their October lows," said Peter Cardillo, chief strategist at Global Partner Securities.
By lunchtime, the Dow Jones Industrial Average was down 110.44 at 7,747.80 after losing nearly 150 points earlier in the session. The broader S&P 500 index shed 11.64 at 820.94 and the Nasdaq Composite lost 23.58 at 1,298.80. Small-cap stocks also fell but their losses were narrower as the Russell 2000 index shed 2.85 at 355.37.
A sharp fall in consumer sentiment weighed heavily on the markets. While Merrill Lynch delivered a blow to the retail sector, noting that stocks "had underperformed the market since last September and we expect them to continue to underperform". Shares in Wal-Mart, the world's biggest retailer, were off 0.4 per cent at $47.44.
Home Depot was down 1 per cent at $21.99, in spite of reporting fourth-quarter earnings that beat Wall Street estimates. However, there were some bright spots with Federated Department Stores up 1.2 per cent to $25.11 due to positive earnings and JC Penney reversed losses and climbed 0.3 per cent to $19.44.
Tech stocks were the biggest losers in the S&P index, dragged down by the big-cap names. Cisco Systems dropped 4.7 per cent at $13.75. Microsoft fell 2.4 per cent at $23.50, and Intel lost 1.7 per cent at $16.26.
Rob Arancio, Nasdaq trader at Lehman Brothers, said investors were selling networking and software stocks because they were among the biggest gainers during the recent tech rally.
He noted BEA Systems as a "classic example" of a tech stock that jumped from below $5 in October to $14 in January. Shares in BEA fell 5.5 per cent at $9.44. "Shares are down 30 per cent in three days because people are thinking the IT environment is not very good," Mr Arancio said.
Macrovision, a security software company, gained 0.5 per cent to $11.83 after the company reported a better-than -expected earnings quarter bolstered by strength in their video business. But analyst Sterling Auty at JP Morgan cautioned in a research note that Macrovision still holds "significant risk", saying, "While some aspects of the business appear to be gaining some strength we do not see near-term positive catalysts that give us conviction to be more constructive on the name."
The biggest loser on the Nasdaq was PrintCafe Software, which dropped 25.3 per cent at $2.42, on the news that Canadian rival Creo rescinded its offer to buy the company.
Qwest Communications shed 2.4 per cent at $3.30 after John Ashcroft, US attorney general, said the Department of Justice had filed criminal fraud charges against four former Qwest managers in connection with an accounting scandal.
All sectors were lower by midday. The utility sector, which had shown some gains earlier in the session also lost ground. El Paso, however, was a bright spot in the sector after the energy trader announced a $1bn financing deal and the sale of one of its natural gas and oil reserves. Shares rose 8.4 per cent to $4.93.
Williams Cos gained 6 per cent to $3.74 after Morgan Stanley upgraded the company to "equalweight" from "underweight", citing lower liquidity risk.
H&R Block shed 0.5 per cent at $37.38 in spite of the company reporting quarterly earnings that beat Wall Street expectations.
AOL Time Warner shares bucked the negative trend, up 2.5 per cent to $10.31 after the New York Times reported that two potential parties were interested in AOL's book publishing division.
Financial stocks continued to slump with Citigroup down 2 per cent at $32.86 and JPMorganChase down 1.2 per cent at $22.03. American Express shed 0.51 per cent at $32.47.
There were one bright spot on the Dow, which was Alcoa. Shares of the aluminium maker were the biggest loser in the previous session but rebounded 0.3 per cent to $20. DuPont was the biggest loser, down 2.5 per cent to $35.95.