FINANCIAL MARKETS : Stocks Retreat as Investors Take Profits
Stocks fell sharply Thursday, led by technology shares, as investors ignored bullish economic news and aggressively sold their holdings to book year-end profits. A slew of disappointing earnings announcements also hurt stocks.
Traders attributed some of the loss to the “triple witching” expiration today of options and futures contracts, which often adds volatility to the market in sessions leading up to the deadline.
The Dow Jones industrial average fell 34.32 points to 5,182.15, after climbing Wednesday to its 69th record high of the year. Traders said computer-driven sell programs in the last hour of trading accounted for about 30 points of that loss.
Declining issues led advancers by about 11 to 9 on the New York Stock Exchange, where volume was heavy at 461.96 million shares, up from Wednesday’s pace.
Broad indexes were particularly hard-hit by the sell-off in technology shares. The NYSE’s composite index fell 2.07 points to 329.10. The Standard & Poor’s 500 index fell 4.77 points to 616.92. The Nasdaq composite index fell 18.35 points to 1,038.19.
“There’s some serious weakness here,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross. “It shows you that yesterday’s gains were not broad-based.”
The 30-year Treasury bond yield rose from Wednesday’s 6.07% to 6.08%, after falling earlier following a flurry of economic reports from the government.
The Labor Department said consumer prices were unchanged in November as food and energy prices dropped. The Commerce Department said business inventories rose 0.6% in October, the biggest increase in six months.
The Federal Reserve Board reported that industrial production rose a modest 0.2% in November, and that industries were operating at 83.1% of capacity last month, down 0.1 a percentage point.
Taken together, the data eased fears that the economy was growing too fast to justify an interest-rate cut by the Fed, possibly as early as its policy meeting next week.
Lower rates enhance the value of existing fixed-return investments and help corporations lower borrowing costs.
A U.S. rate cut was made even likelier by cuts in interest rates by Germany on Thursday and by England on Wednesday. But Germany’s half-point easing of two key short-term interest rates, which was widely expected, sent the dollar lower.
Among market highlights:
* Among the companies reporting weaker-than-expected earnings was Federal Express, which dropped 5 1/4 to 76 3/8. The delivery company said its fiscal second-quarter net income rose a lower-than-expected 4%, on higher costs resulting from a work slowdown by its pilots union and declining international profit. Best Buy said earnings in the third quarter ended Nov. 25 were unchanged at about $17.8 million, or 41 cents a share. Analysts expected the company to earn 45 cents. The stock dropped 1 3/8 to 17 7/8.
* Telecommunications stocks dropped sharply after Nokia said third-quarter pretax operating profit will be below than the year-earlier period. The Helsinki-based company’s Class A American depositary receipts plummeted more than 23%, dropping 10 3/4 to 35 1/2 as the most active Big Board issue. More than 20 million shares changed hands.
Vodafone Group’s American depositary receipts fell 1 3/8 to 32 1/8. Ericsson Telephone’s ADRs declined 1 3/4 to 19 in leading Nasdaq volume of 13.4 million shares.
* Technology stocks were broadly weaker, with IBM down 3/4 at 93 3/4, Motorola down 2 1/2 at 57 3/8, Hewlett-Packard down 2 5/8 to 78 1/8, Micron Technology down 3 5/8 to 50, Intel down 2 5/8 to 60, Sun Microsystems down 4 at 44 7/8, and Dell, off 3 3/4 to 32 1/4.
Internet-related shares, another sector that had seen strong gains, were down sharply as well. Netscape plunged 9 1/4 to 135 3/4, Spyglass lost 4 1/4 to 97, and Netcom declined 4 3/4 to 54 3/8.
* Microsoft dropped 3 to 88 3/4. The software maker said it will join NBC in a new 24-hour cable news channel complemented by an online Internet service. Shares of General Electric, the parent company of NBC, fell 5/8 to 71 3/8.
Shares in Frankfurt showed little movement after a cut in key interest rates by the Bundesbank, with some traders disappointed by the reaction. The 30-share DAX index ended the day up 8.05 points at 2,285.85. Other European markets were up modestly.
Tokyo shares made solid gains, ending at an 11-month high. The 225-share Nikkei average advanced 215.82 points or 1.12% to 19,499.30, just off a key level of 19,500. It was the highest close since Jan. 9.
