And in the USA.........


Records are meant to be broken. Today, amid more bad news about the corporate earnings outlook, they were blown to smithereens.

The Dow Jones Industrial Average plunged 293 points, or 3%, to 9485, its lowest close since Mar. 4, 1999, while the Nasdaq Composite Index tanked 110 points, or 6.2%, to 1673, a depth last seen on Oct. 20, 1998

During one of the most wicked sessions on Wall Street in recent memory, support levels were thrown out the window. The first one to go was the 1700 benchmark on the tech-heavy Nasdaq, followed by the 9500 yardstick on the blue-chip Dow. The S&P 500 finished down 39 points, or 3.4%, to 1106, a fresh 29-month low for the broader market index.

Sparking the selloff was a fresh batch of confessions from technology companies about the quarter that just ended.

The culprits: B2B play Ariba (ARBA:Nasdaq - news) fell 20.7% to $4.44, networker Redback Networks (RBAK:Nasdaq - news) shed 15.8% to $9.77, Internet infrastructure company Inktomi (INKT:Nasdaq - news) lost a whopping 55.3% to $2.79, and e-services firm E.piphany (EPNY:Nasdaq - news) dropped 28% to $7.09.

Elsewhere in the business-to-business space, shares of (PPRO:Nasdaq - news) plunged 42.7% to $3.75, after Wedbush Morgan initiated coverage of the company with a "sell" rating. "We believe that PurchasePro's Dec. 2000 quarter benefited from aggressive accounting related to software swaps with a strategic partner," the firm said in a research note. "Depending on one's perspective, this served to either overstate revenues or implied cash flow for the quarter."

Although the bad news in the tech sector was a catalyst for today's losses, traders said the widespread carnage was reflective of a bear market, where snapback rallies are followed up with hostile selling.

"People involved in this market are renters of stock," said Sam Ginzburg, senior managing director of equity trading at Gruntal. "This a trader's market, where people do not own stock. They're in and out." Hedge fund activity, said Ginzburg, has exacerbated things, as firms will lean on stocks to push them down or prop them up.

"One thing I keep reminding people is that nothing goes straight down," said Ginzburg. "Today's selloff could be followed by a vicious up day, if the market catches a break. But it will be nothing more than a trading turn

Leading the Dow lower, United Technologies (UTX:NYSE - news) shed 3.5% to $70.83, IBM (IBM:NYSE - news) tumbled 4.5% to $90.39, Honeywell (HON:NYSE - news) weakened 5.5% to $38.25, Microsoft (MSFT:Nasdaq - news) fell 4% to $53.38, and Caterpillar (CAT:NYSE - news) staggered 5.1% to $42.16.

"The Dow is the last bastion of indices to hold up," said Ginzburg. "I wouldn't be surprised if some of the meat and potatoes companies lower expectations for the quarter. Some of the Dow names haven't come down enough."

Also weighing on today's market was tension overseas. Today marks Day Three of the standoff between China and the U.S. over an American spy plane held in China. Chinese president Jiang Zemin is asking for the U.S. to accept full responsibility for the collision between a Chinese fighter plane and the U.S. plane and to halt surveillance missions near China's coasts.

Market internals were atrocious this afternoon: Decliners led advancers on New York Stock Exchange by more than 3-to-1, while losers outnumbered winners on the Nasdaq by nearly 4-to-1. Trading volume was light for most of the day, as apparently, many investors are thinking twice about playing the market these days.

"At this point, it's difficult for researchers and salesman to pound the table," said Ned Collins, executive vice-president of U.S. stocks at Daiwa Securities America. "It's tough to tell people they've got to own stocks now."

If this latest round of earnings news is any indication about the future, there are probably lots more companies with last-minute disappointments up their sleeves. According to market experts, until the earnings picture brightens, the stock market outlook will darken.

Not until the first quarter of 2002, Collins said, are earnings likely to turn around. But since the stock market is a six-month leading indicator, he predicts that stocks could see a comeback in June. Before that time, he thinks the Dow could go as low as 8500. "Markets don't announce tops and bottoms, but it feels like there's more room on the way down," he said.

And from

NEW YORK (CBS.MW) - Tech stocks cracked Tuesday under the weight of profit warnings, slapping the Nasdaq with a 6 percent loss and taking the index to a level not witnessed since October 1998. The Dow Industrials also ended with bruising losses, tumbling 300 points as all but one of its components ended deep in the red.

The [selling] may be overdone but the problem is that nobody has a reason to get back into the market," said Art Hogan, chief market strategist at Jefferies & Co.

"This is all about the unwinding in tech stocks. We're at the ultimate extremes. It's the flipside of what happened last year. They pulled everyone into tech stocks last year and now they're pushing everyone out," exclaimed Scott Bleier, chief investment strategist at Prime Charter.

"The mid- and large-cap stocks in the software and Net space have now become small caps - which is what they should have been in the first place. And the mega-caps are becoming mid-caps," Bleier commented. "Ariba got to its [old, lofty] valuations on pure speculation and fantasy."

In sector action, only the defensive gold group eked out a gain while brokerage, biotech, cyclical, retail and oil service issues took their lumps. Bombarded by profit warnings, Internet software and business-to-business issues tumbled. Networking shares also struggled significantly, with a loss of nearly 10 percent in the sector's index. View latest market stats.

The Dow Jones Industrials Average ($DJ: news, msgs, alerts) shaved 292.22 points, or 3 percent, to 9,485.71.

All of the Dow's 30 stocks ended sharply lower. The blue-chip barometer's biggest losers were shares of J.P. Morgan Chase, Hewlett-Packard, Caterpillar, General Electric, Honeywell, Microsoft, IBM, AT&T and Citigroup.

The Nasdaq Composite ($COMPQ: news, msgs, alerts) slid 109.97 points, or 6.2 percent, to 1,673 while the Nasdaq 100 Index ($NDX: news, msgs, alerts) gave up a staggering 117.53 points, or 7.7 percent, to 1,399.05.

"The market pendulum that swung so far to the bullish extreme a year ago is now swinging far into the bear territory, which also means that a bounce, when it comes, will also be large," commented Robert Dickey, technical strategist at Dain Rauscher.

The Standard & Poor's 500 Index ($SPX: news, msgs, alerts) fell 3.4 percent while the Russell 2000 Index ($RUT: news, msgs, alerts) of small-capitalization stocks dropped 2.9 percent.

Volume was heavy at 1.38 billion on the NYSE and at 2.51 billion on the Nasdaq Stock Market. Market breadth was negative, with decliners squashing advancers by 24 to 7 on the NYSE and by 30 to 8 on the Nasdaq.

See After Hours for post-market trading activity.

No place to hide

One strategist notes that the current environment leaves no place for investors to hide.

"There's a lot of anxiety. Until recently, drug and natural gas companies had been holding up but it's now almost impossible to find areas of the market immune to the selling. Investors are [dumping] the most liquid names to pay for margin calls," remarked Mike Sheldon, chief market strategist at Spencer Clarke.

"We're seeing the unraveling of the massive building in capital equipment spending during the late 1990s. Time is a key factor [in the healing process]," Sheldon conceded.

"What is an investor to do in this environment? Concentrated portfolios are not a good thing. The kind of volatility we are experiencing now can produce quick and excruciating pain. And multiple names in a portfolio don't help if they are all marching in the same parade," commented Todd Petzel, president and chief investment officer at Commonfund Asset Management Company.

"One should resist the temptation to make a big 'catch-up' bet. We should remember not to be too anxious to make big bets on individual stocks that are tumbling," Petzel advised in a note to clients Tuesday.

Salomon ups equity weighting

Salomon Smith Barney upped its equity weighting to 70 percent from 65 percent Tuesday, shifting 5 percent of its asset allocation from bonds to stocks.

"Much of the tech wreck appears behind us as the frothiness of the last few years has been reversed in remarkable and dramatic fashion. Yet we would still warn investors that we do not anticipate any major recovery in the technology sector due to excess capacity issues - but we would highlight that trading rallies could ensue given the tech sector's more reasonable valuation levels and the Nasdaq's oversold condition," the brokerage said in a note to clients.

Smith Barney said the change in its stance doesn't reflect any new earth-shattering news, but the cumulative effect of a series of indicators.

The brokerage believes leadership for a market rebound is likely to come from the financial sector, driven by lower interest rates.

Smith Barney's targets on the averages reflect anticipation of a 20 percent appreciation form current levels: the S&P 500's target has been lowered to 1,400 from 1,450 for 2001 while the Dow's was cut back to 11,400 from 11,750.

Excellent stuff, Mark. The point made by Todd Petzel in his comment on "What should an investor do in this environment" is of particular significance, and trust NO ONE regularly reading this BB would have the tempatation to make a "big catch up bet".