Nasdaq dives more than 5%

Associated Press

NEW YORK – Stocks fell sharply today, pulling the Nasdaq composite index down 190 points, as disappointing revenue figures from Nortel Networks reawakened the market’s worries about earnings.

Nasdaq fell 190.20, or nearly 5.6 percent, to 3,229.59, according to preliminary calculations.

The Dow Jones industrial average, which alternated between positive and negative territory throughout the day, closed down 66.59 at 10,326.48,. The Standard &Poor’s 500 index fell 33.23 to 1,364.90.

Investors who had shown signs of relaxing about earnings reports in the past few sessions proved they are still nervous about profits, higher energy costs and an economic slowdown.

“They keep getting blindsided,” said Larry Rice, chief investment officer at Josephthal &Co.

Analysts, including Rice, said investors should readjust their outlooks, warning that a consistent stock rally could take a while.

“It’s still not a time to throw caution to the wind,” said Rice, who even warned investors against bargain hunting.

Jack Shaughnessy, chief investment strategist for Advest Inc., said expectations were too high throughout the third-quarter earnings season.

Investors sold off Nortel and analysts downgraded the stock after the fiber-optics maker announced disappointing revenues late Tuesday. Nortel plummeted $18.38, or 29 percent, to $45.

The company, which pulled the Nasdaq lower, blamed its shortfall on a slowdown in optical sales growth, limitations on how fast it could install equipment and inventory glut on the part of its customers. Nortel’s talk about problems in the industry sent it and other networking stocks tumbling.

“When you have an issue like demand being raised, it calls into question the entire sector,” said Arthur Hogan, chief market analyst at Jeffries &Co. “That is really what is causing the drag on the market today.”

Fellow fiber-optic concern Ciena lost $27 to trade at $108.38. JDS Uniphase also was off $24.06 at $71.

Corning, another leader in fiber optics, announced better-than-expected earnings on Monday, but investors still punished it based on Nortel’s performance. Corning dove $13 to $77.

But Hogan remained confident that the downturn was confined to fiber optics and won’t last.

“We will see that this has been overdone tomorrow, and go in and grab some of the bargains that have been created,” Hogan said.

Longer-term relief for the tech-heavy Nasdaq could be in sight Friday when the government releases gross domestic product figures, Shaughnessy said. If economic growth has slowed, the Federal Reserve might consider lowering interest rates before the end of the year.

“They don’t want to see technology companies flounder, because that could undermine productivity growth, which would increase inflation,” he said.

AT&T, which beat third-quarter earnings expectations, was down $3.63, or 13.3 percent, at $23.56 as investors digested details of its widely expected restructuring plan and a warning about fourth-quarter earnings. The telecommunications company was responsible for much of the Dow’s loss.

Declining issues outnumbered advancers by a 2-to-1 ratio on the New York Stock Exchange, where volume came to 1.29 billion shares, compared with 1.15 billion in the previous session.

The Russell 2000 index fell 12.64 to 475.81.

Overseas, Japan’s Nikkei stock average fell 2.03 percent. Germany’s DAX index was down 0.80 percent, Britain’s FT-SE 100 fell 1.10 percent, and France’s CAC-40 was down 0.72 percent.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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