Technology Issues Battered as Dow Sinks 25.68 Points
A rout in technology issues dragged the stock market lower Thursday and increased fears of a deeper and broader market selloff ahead.
Analysts said stocks’ slide was all the more troubling because the bond and currency markets were stable Thursday. That should have lent support to stocks.
On Wall Street, the technology-heavy Nasdaq market of mostly smaller stocks led the decline. The Nasdaq composite index tumbled 11.89 points to 700.85, its lowest level since July.
Blue chip stocks, which had held up for much of the day, were pulled down in late trading by the sinking Nasdaq market. The Dow Jones industrial average, which had shed 103 points in three sessions before recovering 16.80 points Wednesday, dropped another 25.68 points to 3,699.09.
Declining issues swamped advancers by about 2 to 1 on both the New York Stock Exchange and Nasdaq.
James Schroeder, analyst at MMS International in Chicago, said Thursday’s losses were frightening because technology stocks “had previously provided important leadership” in the market.
The loss of that leadership “doesn’t present a very pretty picture,” Schroeder said, especially in view of current concerns about the weak 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 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.
Cisco shares slumped 2 1/2 to 21, pulling other computer networkers down as well.
Sharp declines in some retail stocks also weighed on the market.
The dollar, meanwhile, continued to stabilize after plunging early in the week, even though comments by officials at the Bundesbank raised doubts about whether Germany’s central bank would help rescue the U.S. currency if it were to slump further.
In New York, the dollar was quoted in late trading at 101.25 Japanese yen, up from 100.95 yen Wednesday. The dollar eased only slightly against the German mark, to 1.603 marks from 1.605.
The bond market was also calm, recovering from an early mild selloff after the government reported a better-than-expected rise in durable goods orders in May. The 30-year Treasury bond yield was unchanged from Wednesday’s close, at 7.40%.
Bonds were helped by another dip in commodity prices, as beneficial rains across the Midwest continued to pressure grain prices.
But none of the good news meant much for stocks. “People are just very scared,” said Tony Dwyer, chief market strategist at Sherwood Research.
With fears still rampant that the dollar could sink again and that the U.S. economy will slow this summer, investors are worried that corporate profits could begin to disappoint after more than a year of upbeat reports, some analysts say.
Also, with the end of the second quarter looming, traders fear that portfolio managers will increasingly feel pressured to dump losing stocks and raise cash so clients see a more cautious approach in second-quarter reports.
Among Thursday’s market highlights:
* Computer networkers following Cisco lower included Wellfleet Communications, down 1 5/8 to 21 1/4; Newbridge Networks, down 2 1/4 to 28 7/8; Cabletron Systems, off 5 3/4 at 85, and Chipcom, down 1 1/2 to 32 1/2.
* Disk drive makers were also plummeted after Montgomery Securities lowered its estimates of current-quarter earnings for key companies. Seagate Technology fell 1 1/4 to 19, Quantum dropped 1 1/8 to 11 3/4 and Conner Peripherals fell 5/8 to 11 7/8.
* Among other tech issues, Apple Computer fell 1 1/8 to 25 1/8, Microsoft slid 1 3/8 to 50 1/8, Lotus Development plunged 2 11/16 to 33 3/4, IBM fell 1 1/8 to 60 7/8, BMC Software slumped 3 to 43 3/4 and Intel dropped 1 1/4 to 58 3/8.
* Some retail stocks were weak, which some analysts attributed to concerns about the economy. Sears tumbled 2 to 46 1/8, Nordstrom sank 1 5/8 to 43 1/2 and J.C. Penney gave up 7/8 to 49 1/8.
* Auto makers also slumped. GM fell 1 5/8 to 50 3/4, Chrysler lost 1/2 to 47 1/4 and Ford dropped 7/8 to 57 3/8.
* Other industrial issues that weakened included Kimberly Clark, down 1 5/8 to 54; Georgia-Pacific, down 1 3/8 to 61 3/8, and Deere, off 3/4 to 69 3/4.
* Many financial stocks were hit by profit taking. Wells Fargo lost 1 3/8 to 153 3/4, First Interstate fell 1 3/8 to 75 1/2 and Chase Manhattan eased 5/8 to 37 1/4.
* On the upside, 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 2.2%, 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
