FINANCIAL MARKETS : Techs Drag Stocks Down; Gold Advances
Stocks closed broadly lower Tuesday for a second consecutive session, as technology shares were slammed by growing worries that computer demand is weakening.
Saber rattling on Capitol Hill over the federal debt ceiling also may have spooked some investors, traders said, as bond yields edged up. Gold appeared to gain from stock and bond jitters.
On Wall Street the Dow Jones industrial average fell 16.98 points to 4,797.03, but the blue-chip index’s modest loss belied the decline in the Nasdaq market.
The Nasdaq composite index stumbled 18.24 points to 1,043.90, dragged down by steep declines in most major technology stocks.
Computer chip maker Cirrus Logic set the tone for the session after warning of lower sales and earnings because a major customer canceled a large order. That sparked selling across the broad spectrum of tech shares, on worries that chip orders--and, by association, orders for all sorts of electronic equipment--are waning.
Wall Street was further unnerved by tech stock downgrades from Merrill Lynch & Co. and SoundView Financial, as analysts at those firms voiced concern about demand versus supply in the technology business.
Many analysts insist that concerns about slowing growth in the tech sector are overblown. Charles Boucher, analyst at Hambrecht & Quist, said other tech selloffs since 1993 have been based on similar predictions that the chip business was peaking.
“Those calls were flatly wrong,” Boucher said. “And this call is flat-out wrong.”
But that optimism failed to deter sellers Tuesday. Losers swamped winners by 20 to 14 in the Nasdaq market, though losers had just a 12-10 edge on the NYSE.
Among the day’s highlights:
* Cirrus Logic plunged 12 3/4 to 28 on its announcement, and most other chip stocks also slumped, pushed lower by comments from Merrill and SoundView analysts.
Merrill’s analyst, for example, reduced his “near-term” rating on Texas Instruments, Micron Technology and LSI Logic to “neutral” from “above average,” citing worries about chip demand.
Texas Instruments sank 1 5/8 to 60 7/8, Micron lost 3 3/8 to 61 1/8 and LSI fell 3 1/2 to 41 1/2.
* SoundView’s analyst, meanwhile, cut near-term ratings on several semiconductor equipment makers to “hold” from “buy.” Among the stocks cut, Teradyne dropped 4 1/8 to 29 3/4 and Applied Materials lost 5 1/8 to 48 3/4.
* Other tech stocks tumbling included Intel, down 4 7/16 to 66 3/8; Compaq, off 1 3/4 to 52 7/8; Seagate, down 3 3/8 to 44 7/8, and Parametric, down 3 1/2 to 66.
Among computer retailers, OfficeMax fell 2 1/2 to 23 3/4 and CompUSA dropped 3 1/4 to 33 5/8.
* Bucking the trend was Apple Computer, which rose 1 1/2 to 39 5/8 on renewed talk it might be bought by Hewlett-Packard. Both companies declined to comment.
* Some transportation issues contributed to the market’s weakness, as profit takers moved in. Northwest Airlines lost 1 1/8 to 47 1/8, Conrail fell 5/8 to 67 3/4 and Federal Express was off 5/8 to 84 5/8.
* On the plus side, some general retailers gained. Mercantile Stores rose 1 to 47 3/4, J.C. Penney added 1 1/8 to 46 and May Department Stores was up 1 1/8 to 42 7/8.
* Gold stocks were higher as the metal rose $3 to $385.40 an ounce in futures trading, possibly gaining as a “safe haven” from market turmoil. Among gold miners, ASA jumped 1 3/8 to 39 1/2 and Newmont Gold rose 1 7/8 to 40.
Gold’s gain came as Treasury bond yields inched up. Investors are nervously watching the political battle between President Clinton and Congress over a balanced-budget plan.
Republican demands attached to an urgently needed bill to raise the federal debt ceiling could bring a veto, potentially throwing the government into default next week.
The yield of the Treasury’s main 30-year bond edged up to 6.31% from 6.29% on Monday.
