U.S. stocks fell sharply Tuesday as investors stampeded out of technology shares, which had risen steadily over the past five weeks. Technology shares faced a flood of selling even though most major companies in the sector reported quarterly earnings that exceeded analysts' estimates.
The Dow Jones industrial average closed down 191.55, or 1.71%, at 10,996.13 The Nasdaq composite plunged 98.11, or 3.47%, to 2,732.18. It was the worst percentage decline for the Nasdaq since its 5.6% drop on April 19.
Software giant Microsoft (MSFT) said after yesterday's close that it earned 40 cents per share in its fiscal fourth period, 4 cents above the mean analyst estimate. However, Microsoft also warned that its revenue growth rate likely will decline in fiscal 2000 because of slowing PC demand, uncertainty surrounding year 2000, and "uncertain global economic conditions." The company also stated that it "will not see further margin expansion." Microsoft's stock declined 5 1/16 to 93 5/16 today.
IBM (IBM) also reported earnings that beat analyst estimates after yesterday's close. The computer giant posted an operating profit of 91 cents per share, 3 cents per share above the mean analyst expectation, and 16 cents greater than the year-earlier quarter. Still, IBM shares declined 6 7/8, or 5.1%, to 127 3/4 today.
Networking giant Lucent Technologies (LU) reported this morning third quarter net income that beat analysts' expectations, as telecommunications companies around the world continued to invest heavily in Lucent's equipment. Murray Hill, New Jersey-based Lucent said that its net income increased 60% to $829 million, or 26 cents per share, for the third fiscal quarter ended June 30, excluding one-time merger-related costs. Lucent was one of today's heaviest losers on a percentage basis, dropping 6 15/16, or 9%, to 69 7/8.
Texas Instruments (TXN) reported a second-quarter operating profit of 92 cents per share, versus the mean analyst estimate of 86 cents. But its stock still fell 8 15/16 to 141.
Among the PC makers, Dell (DELL) dropped 1 5/16 to 41 1/8, Compaq (CPQ) declined 7/8 to 25 5/8, and Gateway (GTW) lost 2 5/8 to 67 3/8. Sun Microsystems (SUNW) dipped 3 13/16 to 70.
Most ERP vendors' stocks were lower, with Oracle (ORCL) dropping 2 to 37 1/2, PeopleSoft (PSFT) losing 1 to 14 1/2, SAP (SAP) dipping 1 1/16 to 33 7/16, and i2 Technologies (ITWO) plunging 3 1/2, or 7.9%, to 41.
Internet stocks also took part in the selloff, with Yahoo! (YHOO) dropping 7 3/8 to 142 1/8, America Online (AOL) losing 5 7/16 to 113 9/16, and Ebay (EBAY) declining 4 3/4 to 112 15/16.
Unisys (UIS) and Data General (DGN) were among the only technology stocks to escape the broad market decline. On July 15, Unisys said that its second-quarter net income rose 33% to $120 million, topping Wall Street expectations. The company's stock declined only 1/8 today to 43 7/8. Data General rose 1/4 to 16 1/16.