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Nasdaq falls for day four
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May 22, 2000: 5:16 p.m. ET
But in wild day, tech buyers save Nasdaq from lowest close of year
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - A late bout of bargain hunting kept the Nasdaq composite index from plunging to its lowest levels of the year Monday. But the index still fell for the fourth straight session on concerns that rising interest rates will crimp profits.
Other major gauges also lost value, including the Dow Jones industrial average after General Motors sharply limited the number of GM shares that can be exchanged for a tracking stock.
Still, the greatest drama was reserved for the Nasdaq. Down by as much as 218 points, the index charged back by session's end. Analysts found no fresh news behind either the early sell-off or the late partial comeback, blaming it mostly on sentiment and momentum.
"Buyers came back into the marketplace," Art Hogan, chief market strategist at Jefferies & Co. told CNN's Street Sweep. "But I don't know how much longer that will be."
 Ash Rajan, market analyst at Prudential Securities, seemed more optimistic.
"I'm encouraged by the turnaround in the last part of the day," he told CNN's Street Sweep.
Either way, the Nasdaq is still off about 33 percent from its March 10 high. With steeper borrowing costs expected to slow profits, analysts say investors -- who only three months ago bid technology stocks to stratospheric levels -- will no longer pay any price for technology stocks.
The Nasdaq Monday fell 26.19 points to 3,364.421, just 43 points above its lowest close for the year: 3,321.29, set April 14. The index jumped 86 percent in 1999 and was up 24 percent in 2000 through March 10. Analysts said those levels may not have been sustainable.
"We've had a decided turn from flights of fantasy to a return to reality in terms of valuations," said Alan Ackerman, vice president at Fahnestock & Co. "They are pressured by high price-to-earnings ratios and ongoing (interest) rate hike concerns."
 Other indexes were not immune. The Dow fell 84.30 points to 10,542.55. And the S&P 500 shed 6.23 to 1,400.72.
More stocks fell than rose. Declining issues on the New York Stock Exchange beat advancing ones 2,029 to 1,000 as volume reached 867 million shares. Nasdaq losers beat winners 2,841 to 1,221. More than 1.6 billion shares changed hands.
In other markets, the dollar weakened against the euro but was little changed versus the yen. Treasury securities rose.
Tech bear market continues
Tech stocks, which fueled the bull market of 1999 and early 2000, have led a steady downturn that began after March 10 when the Nasdaq closed at 5,048.
Since then, the Federal Reserve has raised interest rates twice, continuing a pattern of tighter credit that began last June. The most recent hike was an aggressive half-percentage-point increase last Tuesday. Based on the central bank's statements, economists say the Fed's inflation-fighting job is far from done.
 "The interest rate environment is very troubling," Mark Stoekle, portfolio manager at Liberty Colonial, told CNNfn's market coverage. "Many economists are calling for a half-percentage-point (interest rate increase)."
Al Goldman, chief market strategist at AG Edwards in St. Louis, told CNN's In the Money that interest rate fear is among the factors behind the selling (447K WAV) (447K AIFF).
And sell they did. Lycos (LCOS: Research, Estimates) slumped 4-3/8 to 53-3/4, Oracle (ORCL: Research, Estimates) shed 2-1/4 to 67-13/16 and Hewlett-Packard (HWP: Research, Estimates) lost 3-7/16 to122-3/4.
Technology stocks weren't the only ones to fall.
General Motors Corp. tumbled after saying its offer to swap shares of its Hughes Electronics tracking stock for its own common shares was oversubscribed, forcing it to limit shareholders to exchanging 25 percent of the GM shares they had hoped to replace.
General Motors (GM: Research, Estimates) plunged 9-3/16 to 77-3/4, but Hughes (GMH: Research, Estimates) -- a leader in satellite TV transmission -- jumped 6-7/8 to 96-3/4.
News vacuum ahead
Wall Street may get little direction in the days ahead. The week holds few major earnings reports and the handful of economic indicators don't come until later this week. The next Federal Reserve meeting is more than a month away.
 "That gives us a lot of trading time, unfortunately," Jefferies' Hogan said.
Analysts will be watching for any signs of an economic slowdown that could keep the Fed from raising rates aggressively.
Ironically, the latest stock market slide could actually take pressure of a Federal Reserve concerned that surging equities will spark inflationary consumer spending.
"In light of today's $500 billion wealth loss in the stock market, it is rational to begin thinking about an endgame to the Fed's rate hike phase," said Tony Crescenzi, bond strategist at Miller Tabak & Co. "At the very least, recent developments tell us that the Fed's actions have finally reached a critical breaking point that limits the scope for significant rate hikes going forward."
Two software deals were announced Monday. In the biggest, Vignette Corp., a leading supplier of e-business software, agreed Monday to purchase OnDisplay Inc. for roughly $1.7 billion in stock. Vignette (VIGN: Research, Estimates) fell 8-15/16 to 34-7/8 and OnDisplay (ONDS: Research, Estimates) gained 7/8 to 54-1/8.
Shares of webMethods Inc. (WEBM: Research, Estimates) shed 15 to 72 after the software developer announced plans to buy Active Software Inc. (ASWX: Research, Estimates) in a $1.3 billion all-stock deal. Active Software fell 15/16 to 32-1/16.
But not all stocks fell Monday. Utility stocks, defensive investments that often perform well in market downturns, drew buyers. Con Edison (ED: Research, Estimates) rose 7/16 to 33-13/16, United Utilities (UU: Research, Estimates) jumped 1/8 to 19-3/8 and Reliant Energy (REI: Research, Estimates) gained 1-7/16 to 28-1/4. 
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