FINANCIAL MARKETS : Tech Stocks Tumble but Dow Still Gains
Profit taking in red-hot technology stocks sent the broad market lower Wednesday, but a surge in heavy-industry shares boosted the Dow industrials to a new high.
In a roller-coaster session for the Dow, it rocketed 47 points in early trading on fresh signs of slower economic growth.
But that gain quickly evaporated in the afternoon, as selling of tech issues spilled into the broad market, traders said.
In the final hour of trading, however, the Dow rebounded again, and closed with a gain of 8.99 points to 4,160.80--the index’s ninth record since March 10.
The day’s wild swings only increased many analysts’ nervousness, after the market’s big rally this quarter. The Dow is up 326.36 points since Dec. 31, or 8.5%.
“A reversal such as (Wednesday’s) shows the skittishness that’s around,” said Anthony Conroy, director of equity trading BT Global Asset Management in New York.
Meanwhile, the bond market rallied modestly after Tuesday’s selloff, as the government reported that sales of new homes in February slid 14% to the lowest level since April, 1992.
The data was seen as further evidence of a slowing economy, which could dissuade the Federal Reserve Board from boosting interest rates again soon.
Bonds’ performance might have been better except for a disappointing Treasury auction of 5-year notes Wednesday, traders said. The average yield on the notes was 6.99%, down from 7.13% at the February auction but not as low as some analysts had expected.
Overall, bond yields closed unchanged or modestly lower Wednesday. The 30-year Treasury bond yield settled at 7.37%, down from 7.39% Tuesday.
The day’s big story was the abrupt selloff in tech stocks, which have led Wall Street higher over the past two months.
“They’ve had such a move it’s been overdone on the upside,” said Tony Dwyer, chief market strategist at Josephthal, Lyon and Ross.
Analysts said there was no particular reason why tech stocks reversed, other than some investors’ desire to cash in profits.
The tech decline showed up in the Nasdaq composite index of mostly smaller stocks, which dove 6.98 points or 0.8% to 819.16 from Tuesday’s record high.
Analysts have suspected that much of the stock market’s recent rally--and especially the rush into tech stocks--has been fueled by “window dressing” on the part of money managers anxious to have their first-quarter statements for clients show that they were in the “right” stocks during the rally.
In the broad market Wednesday, winners and losers were about even on the New York Stock Exchange in heavy trading of 386 million shares. On Nasdaq, losers topped winners 1,712 to 1,569.
Among Wednesday’s highlights:
* Semiconductor stocks led the tech universe lower. Intel fell 1 7/16 to 87 1/16, Texas Instruments sank 3 3/8 to 94 1/4, Cirrus Logic gave up 2 1/8 to 36 1/8 and Micron Technology plunged 6 1/4 to 78 1/2.
Among computer makers, IBM fell 1 1/2 to 83, Hewlett-Packard lost 2 3/8 to 121 5/8 and Digital Equipment dropped 7/8 to 37.
Software stocks also tumbled. Microsoft slid 1 3/8 to 72 1/4, Adobe Systems skidded 2 to 48 1/4, Broderbund gave up 3 3/4 to 53 1/2 and Lotus Development fell 1 3/8 to 38 3/4.
* While tech shares sank, heavy-industry stocks were the day’s stars after Ingersoll-Rand’s surprise takeover bid for machinery maker Clark Equipment. Ingersoll’s offer of between $75 and $77 a share was rejected by Clark, but Clark’s shares still soared 28 1/8 to 81 1/4. Ingersoll’s stock was unchanged at 32 1/8.
Sensing that industrial stocks may be undervalued, investors bid up many of the shares. Caterpillar jumped 2 to 53 7/8, Cummins Engine rose 1 1/8 to 44 1/4, Eaton soared 2 5/8 to 53 1/2, Dover jumped 2 1/8 to 65 1/2 and Trinova surged 3 to 31 1/8.
* Auto stocks also got a lift. Chrysler surged 1 3/4 to 40 3/4, General Motors rose 1 3/8 to 44 1/2 and Ford Motor added 5/8 to 26 5/8.
* Health-care stocks, which like tech shares have been surging this year, also were hit by profit-taking. American Home Products dropped 1 5/8 to 74 1/2, Johnson & Johnson lost 1 3/4 to 60, Sunrise Medical was off 7/8 to 35 and Biogen eased 1 1/2 to 40 1/2.
* Some entertainment issues saw buying. Polygram jumped 1 3/4 to 56 3/4, Cap Cities/ABC added 1 to 89 and News Corp. was up 1/2 to 19.
Also, Las Vegas casino operator Rio Hotel surged 1 1/4 to 12 7/8 after saying it hired investment banking firm Montgomery Securities to evaluate “strategic alternatives” for the company.
In overseas markets, Tokyo’s 225-share Nikkei average couldn’t sustain its recent rally and fell 221.00 points to 16,460.73.
In Frankfurt, the DAX average was up 7.92 points at 1,918.88 while London’s FTSE-100 index added 14.0 points to 3,142.3.
Mexico City’s Bolsa index fell 21.76 points to 1,810.90.
In currency trading the dollar sank again amid diminishing expectations that Germany’s central bank might lower interest rates this week. The dollar also was pressured by the Federal Reserve’s decision Tuesday not to raise U.S. rates, for now.
In New York the dollar closed at 88.39 Japanese yen, down from 88.90 on Tuesday.
The dollar also dropped to 1.383 German marks, down from 1.388.
In commodities trading, gasoline and crude oil rose to their highest prices since August after the largest refiner on the East Coast said a power failure forced it to shut critical gasoline-making equipment.
Bayway Refining said the 130,000 barrel-a-day catalytic cracking unit at its Linden, N.J., refinery is in “standby” mode and isn’t making any gasoline.
Unleaded gasoline futures for April rose 1.26 cents to 59.99 cents a gallon on the New York Merc, the highest price for gasoline since Aug. 4, 1994. Also, May crude oil futures climbed 17 cents to $19.22 a barrel, the highest since Aug. 9.
Gasoline and oil prices have been gaining in recent weeks as U.S. gasoline inventories have dropped to lower-than-expected levels.
