Nasdaq Shrinks, Analysts' Egos Grow

Some tech investors probably woke up in cold sweats this morning, amid nightmares of a plunging Nasdaq. The index lost 9.8 percent in three sessions Tuesday through Thursday (10 percent is considered a correction), while the Dow rose. Journalists scrambled for colorful quotes from analysts who were gloating, panicking or perpetually bullish.

The three-day Nasdaq dip allowed the financial community's old guard to feel as smug as the non-stockpilers did on New Year's Day. CBS MarketWatch quoted two blue-chip fans saying things like "Some common sense is returning to the stock market," "Everybody realized that techs were overvalued," and "Nyah nyah." (Uh, just kidding on that last one.) The wire services remained calm. The AP took the optimism angle, filing one evenhanded article about the Nasdaq-Dow performance dichotomy and one piece headlined "Tech Stock Slide a Bump in Rosy Road, Analysts Say." Meanwhile, the San Jose Mercury News collected all its wire reports and put together a balanced article asking if the tech sector was "letting off a little steam or beginning a meltdown." Most unappetizing prognostication for early-morning readers: a Prudential Securities market analyst's statement that "After you've tasted tech, everything else is warm beer."

If Lucent was as prominent in investors' nightmares as it was in this morning's business news, they spent all night mumbling about networks in their sleep.

Tech stocks were suffering before Lucent said their first-quarter earnings would fall about a billion dollars short of expectations, but some freaked-out analysts predicted that Lucent's huge drop on Thursday would make the wreckage worse. "This is going to send a chill through the tech sector," one analyst told News.com. The Washington Post seemed to disagree, quoting a telecom analyst who dismissed Lucent's performance as a "blip," rather than a real threat to tech stocks. The question is, why would performance of a telecommunications/networking giant affect, for instance, Netcos? To some, we suppose, tech is tech. At least no one predicted Lucent's downward trajectory would directly drag down the Nasdaq; they seemed to realize that Lucent trades on the NYSE. Today will tell whether tech investors can sleep easy this weekend.

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