Intel’s passive outlook
sends stocks plunging

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By Lisa Singhania
Associated Press

NEW YORK >> A murky forecast from Intel sent stocks sharply lower today on worries that a recovery would take longer than expected and the market had risen too high, too fast.

The Dow Jones industrials tumbled more than 200 points to their weakest finish in 1 -1/2 months as the selling spread across the market and intensified late in the session. Analysts said investors were collecting profits rather than risk a loss if an economic turnaround is delayed.

"It's the combination of an uncertain outlook and the relatively high stock valuations out there right now," said Matt Brown, head of equity management at Wilmington Trust. "If the market were dirt cheap, investors might be more comfortable taking risks."

The Dow closed down 211.88, or 2.1 percent, at 9,712.27. It was the lowest close since Nov. 28, when the index was at 9,711.86, and the biggest point drop since Oct. 29, when the index lost 275.

The decline was more severe for the technology-focused Nasdaq composite index, which slid 56.45, or 2.8 percent, to 1,944.46. The Standard & Poor's 500 index lost 18.62, or 1.6 percent, to 1,127.57.

Decliners led advancers more than 3 to 2 on the New York Stock Exchange, with 1,975 down, 1,155 up and 207 unchanged. Volume was 1.45 million shares.

The NYSE composite index fell 7.47 to 575.16, the American Stock Exchange composite index lost 6.10 to 829.42 and the Russell 2000 index fell 8.57 to 476.43.

The Treasury's 2-year note fell 1/32 to 100 -7/8; its yield rose 2 basis points to 2.78 percent. The 10-year note gained 3/32 to 101 -11/32; its yield fell 1 basis point to 4.82 percent. The 30-year bond fell 1/32 to 100 -17/32; its yield was unchanged at 5.34 percent.

Today's stock market downturn was prompted by Intel, which late yesterday reported fourth-quarter results better than estimates but indicated it's too early to tell if an economic recovery has started.

The news upset investors who had sent the sector higher on anticipation that it was about to turn around and would resume the strong growth of the late 1990s. The hope was that Intel would be the first of many tech companies to indicate business was improving.

"The Street has been hoping it would get something like, 'The worst is behind us,' from Intel. Instead, the company said it doesn't see that business is really improving a whole lot," said Todd Clark, head of listed equity trading at Wells Fargo Securities. "That spooked a lot of people, and that's why you're seeing a lot of this selling."

Intel, which had advanced considerably in anticipation of a more upbeat forecast, fell 97 cents to $33.71. Other tech stocks also suffered, including rival Advanced Micro Devices, which was scheduled to report earnings after the market closed. It slipped $1.25 to $17.90.

Even eBay, which beat Wall Street's fourth-quarter estimates and forecast a profitable 2002 late yesterday, dropped $4.09 to $59.94.

Selling was also strong in the broader market, particularly in financial stocks. J.P. Morgan Chase slid $1.36 to $36.51 after missing fourth-quarter estimates and reporting a fourth-quarter decline of $332 million because of losses attributable to the Enron bankruptcy, Argentina's debt default and other equity investment losses.

Kmart tumbled 84 cents to $1.61 on news it will be removed from the Standard & Poor's 500 index at the end of the session. The discount retailer, which many fear is headed for bankruptcy, was being dropped because of its low stock price and financial problems, according to the S&P.

A Federal Reserve report released during the session offered little incentive to buy. The report, known as the Beige Book, indicated that although there are some signs a recovery will begin by mid-year or earlier, its "timing and strength are uncertain."

Also today, the Labor Department reported consumer prices edged down by 0.2 percent in December, capping a year in which inflation was at its lowest since 1998. A dramatic drop in energy prices -- reflecting weak demand amid a worldwide economic slump -- was a key reason.