Dow Slips as Technology Issues Drop
Blue chip stocks closed slightly lower Tuesday, weathering a selloff in technology stocks that sent the Nasdaq market into a tailspin.
Yields on Treasury bonds fell and prices rose for the fifth time in the past six trading days after the Federal Reserve Bank bought government securities to boost banking system reserves, in turn persuading others to buy.
A government report of low wholesale inflation in March also provided a degree of support to the bond market, easing investor concerns about today’s much-anticipated report on consumer prices. The dollar and gold rose slightly.
The Dow Jones industrial average was down 7.14 points to end at 3,681.69, while the Standard & Poor’s list of 500 stocks fell 2.30 to 447.57.
In the broader market, declining issues led advances 1,242 to 876 on New York Stock Exchange volume of more than 256 million shares.
The Nasdaq index, heavily weighted by technology stocks, was off 8.89 points at 739.22.
Semiconductor stocks were hurt by a report of its industry association that said its so-called book-to-bill ratio was unchanged at 1.13 in March. That means that for every $100 of products shipped, manufacturers received $113 in new orders. Many analysts had expected a stronger performance--from 1.16 to 1.2.
The book-to-bill ratio is often taken by investors as an indication of demand in the entire technology sector, analysts said. If demand for chips is weak, the thinking goes, it must be elsewhere in the industry as well.
The Labor Department report that producer prices rose 0.2% in March underscored the fact that any real inflationary pressures have not yet emerged in the economy, analysts said.
The financial markets are watching the Labor Department reports closely because the Federal Reserve has nudged interest rates higher twice this year to try to stop inflation from accelerating.
The price of the Treasury’s main 30-year bond rose 11/32 point, or $3.44 cents per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 7.20% from 7.23% on Monday.
Among the trading highlights:
* Technology shares were battered on all markets. Motorola reported first-quarter earnings of $1.03 a share, up from 72 cents a year ago. Analysts had expected higher earnings, and the stock tumbled 4 1/2 to 95 1/2 on the NYSE.
On Nasdaq, Intel lost 3 7/16 to 65 3/4.
Microsoft lost 2 1/4 at 84 3/4, Micron Technology dropped 4 7/8 to 86 1/2 and Texas Instruments shed 5 5/8 to 73.
* McDonnell Douglas’ stock rose sharply in what analysts said was a reaction to a potential $400-million contract award to launch satellites for the Iridium space-based communications project. McDonnell’s stock rose $3.375 to close at $111.75 on the NYSE.
In other markets:
* The dollar rose against most major currencies as traders shrugged off news that White House economic adviser Robert Rubin said the Administration is not trying to drive the yen higher against the dollar.
Despite his comments, many market players still believe the Administration will back a stronger yen to help shrink the U.S. deficit if the market-opening effort fails. So they bid the yen higher. In London, the dollar rose to 103.55 yen. In New York, it closed at 103.65 yen, up from 103.45.
* On the New York Commodity Exchange, gold closed at $378.50 an ounce, up 60 cents.
* Crude oil prices finished lower after briefly flirting with $16 per barrel. May delivery of light, sweet crude oil settled at $15.75 per barrel, down 12 cents.
