Technology Issues Battered as Dow Sinks 25.68 Points
A rout in technology issues pushed Wall Street lower Thursday, leading analysts and traders to worry that the entire market may be poised for a deeper selloff.
However, bonds and the dollar were steady while commodity prices continued to tumble, taking a key inflation index lower for the fourth straight day.
The Dow Jones industrial average, which had shed 103 points in three sessions before recovering 16.80 points Wednesday, closed down 25.68 at 3,699.09. In the broader market, declining issues swamped advancers by about 2 to 1 on the New York Stock Exchange, where 256.48 million shares were traded.
Broad market indexes, which are heavily weighted in technology stocks, moved sharply lower. Most of Thursday’s carnage was in the Nasdaq composite index, which fell 11.89 to 700.85, a level not seen since last July, when it ended at 700.24.
Other market indexes lost ground as well. The NYSE composite index fell 1.68 to 248.29. The Standard & Poor’s 500 index fell 3.46 to 449.63.
James Schroeder, market analyst at MMS International in Chicago, said Thursday’s losses were frightening because technology stocks “had previously provided important leadership.” The loss of that leadership “doesn’t present a very pretty picture,” Schroeder said, especially in view of current concerns about the flagging dollar and inflation.
The selloff of technology issues was sparked by downgradings by some influential analysts. SoundView Financial Group analyst Michael Karfopoulos lowered his short-term outlook on Cisco Systems Inc. to “hold” from “buy.” He said the computer networking company lost a contract to provide computer routing services to Wal-Mart Stores because of aggressive competition in the industry.
Meanwhile, sentiment was positive in the bond market as attention shifted to economic fundamentals now that the foreign exchange markets were calmer.
The 30-year Treasury yield remained unchanged from Wednesday’s close at 7.40%.
Other securities rose nearly a quarter of a point after recovering from a modest dip when the government Thursday issued a better-than-expected durable goods report for May.
The Commerce Department said factory orders for big-ticket items rose 0.9% in May, led by a big jump in aircraft and defense goods. Many economists had been expecting an increase closer to 0.4%.
In addition, some traders took profits from the price run-up that occurred Wednesday, said Kevin Flanagan, money market economist at Dean Witter Reynolds.
The dip did not last long, however, and prices remained steady or slightly above Wednesday’s level as traders saw the dollar was holding ground and commodity prices continued to drop.
The dollar ended mixed and little changed in quiet trading Thursday as the currency market took a breather from the volatility that pushed the U.S. currency to a postwar low against the Japanese yen.
In New York, the dollar was quoted in late trading at 101.25 Japanese yen, up from 100.95 on Wednesday.
The dollar fell against the German mark after comments by Bundesbank officials raised doubts about whether the German central bank would help rescue the U.S. currency if it were to slump further. The dollar finished at 1.603 marks, down from 1.605.
Meanwhile, beneficial rains across the Midwest continued to pressure grain prices, pushing the Commodity Research Bureau’s index of 21 commodities down 0.46 point to 230.41.
Among Thursday’s market highlights:
* Cisco was the most active stock in Nasdaq trading, dropping 2 1/2 to 21 and pushing down other computer networking stocks, such as Wellfleet Communications, down 1 5/8 to 21 1/4, and Chipcom Corp., down 1 1/2 to 32 1/2.
* Technology stocks took another blow when Montgomery Securities lowered its estimates of current-quarter earnings for disk drive companies. Seagate Technology fell 1 1/4 to 19, and Quantum Corp. fell 1 1/8 to 11 3/4. Conner Peripherals fell 5/8 to 11 7/8.
* Apple Computer fell 1 to 25 1/4, Microsoft fell 1 3/8 to 50 1/8 and Oracle System fell 1 15/16 to 34 5/8. Lotus Development, which said late Monday that its second-quarter earnings will be disappointing, fell 2 11/16 to 33 3/4.
* IBM fell 1 1/8 to 60 7/8, and Hewlett-Packard lost 1 1/2 to 76 3/8.
* General Electric led the action on the Big Board and rose 1/2 to 46 1/4. Conseco Inc. offered by buy Kemper Corp. for $67 per share in cash and stock, topping a $60-per-share cash offer made by GE Capital Corp, a GE unit.
* Conseco rose 1/2 to 51. Kemper rose 3 3/8 to 62 5/8.
* Eastman Kodak rose 3/4 to 47 1/2. Sanofi of France said it will purchase the prescription drug activities of Kodak’s Sterling-Winthrop Inc. unit for $1.68 billion.
In foreign trading, stocks ended sharply higher in Tokyo, with the Nikkei 225-share average closing up 458.89 points, or 2.23%, to 21,040.21, above the psychologically important 21,000 level.
In Europe, Frankfurt’s 30-share DAX average ended at 2,022.10, up 27.68 points, while in London, the Financial Times 100-share average was down 18 points at 2942.4.
Mexico City’s Bolsa index dropped 14.70 points to 2,242.93.
Market Roundup, D8
