Stocks’ Slide Deepens as Tech Issues Tumble; Dow Loses 36
Technology stocks led Wall Street broadly lower Wednesday, as nervous investors continued to take profits from the market’s steep spring run-up.
The Nasdaq composite index of mostly smaller stocks, heavy with technology issues, dove 19.29 points, or 1.7%, to 1,153.29, its lowest level since late April.
The index has now fallen 7.7% from its record high set June 5.
The blue-chip Dow Jones industrial average also slumped, but much less than the Nasdaq index. The Dow lost 36.57 points to 5,682.70.
Meanwhile, oil prices jumped on worries about fresh Middle East terrorism, after a truck bomb exploded at a U.S. base in Saudi Arabia. August crude oil futures in New York surged 69 cents to $20.65 a barrel.
On Wall Street, analysts said the continuing sell-off, especially in smaller stocks, in part reflected institutional investors’ desire to cull portfolios of some high-fliers before the second quarter ends Friday and portfolios must be tallied and listed for clients in midyear reports.
“People are nervous about the market itself. A lot of portfolio managers are paring their exposure,” said Michael Metz, analyst at brokerage Oppenheimer & Co. in New York.
In addition, as is typical at the end of quarters, some companies have “pre-announced” their quarterly earnings, warning that results won’t meet expectations.
Downbeat reports from some technology firms have shaken confidence in those stocks, which rebounded in the spring after a winter sell-off.
On Wednesday, Digital Equipment shares slumped after Richard Chu, an analyst at Cowen & Co., told traders that the computer maker’s fiscal fourth-quarter earnings could be much less than expected and two other analysts cut their estimates.
Digital lost 1 3/4 to 41 7/8.
But the selling in the small-stock arena has been much broader than just tech issues. The Russell 2,000 index of smaller stocks tumbled 1.3% on Wednesday and now is at its lowest level since April 19.
Losers swamped winners by 2 to 1 on Nasdaq. Bigger stocks, however, aren’t being sold as fiercely, and in fact may be picking up some of the money that is flowing out of smaller stocks, analysts said. The blue-chip Standard & Poor’s 500 index dropped just 0.6% on Wednesday, versus the Nasdaq index’s 1.7% slide.
Traders said a key test for the small-stock sector will be whether the shares can rebound with second-quarter earnings reports.
Among Wednesday’s highlights:
* Among technology issues, Dell Computer slid 4 7/8 to 45 3/4, Cisco Systems fell 1 to 53 3/8 and Apple dropped 3/4 to 19 7/8, its lowest level in 10 years.
* Iomega led another sharp retreat in some of the spring’s highest-fliers. The stock plunged 5 1/2 to 21 after the influential Cabot Market Letter recommended that investors sell the disk drive maker’s stock because its momentum is weakening. The stock had been part of Cabot’s model portfolio.
A front-page article in the Wall Street Journal about an SEC inquiry concerning Cabot helped direct more attention to the investment newsletter’s recommendation.
Other battered names included Diana, down 8 5/8 to 39 1/4; MRV Communications, down 6 1/2 to 38; and Presstek, down 8 to 60.
* Cyclical issues, which are linked most directly to economic growth, were weak. Eastman Kodak fell 2 1/8 to 76 3/4, Caterpillar fell 1 1/4 to 67, Boeing fell 1 3/8 to 89 and General Motors fell 1 1/8 to 52.
* Consumer stocks, by contrast, were among the Dow’s steadiest as investors sought companies with reliable revenues. Coca-Cola rose 5/8 to 49 1/8; Procter & Gamble was unchanged at 93 1/2; Merck was unchanged at 65.
But Pfizer slumped 2 3/8 to 71 5/8 after the American Journal of Hypertension published a study that showed older people taking high-blood-pressure drugs are twice as likely to develop cancer as patients taking other hypertension medications. It’s the second time in the last year that the safety of drugs called calcium channel blockers have been under scrutiny.
* Medtronic dropped 1 7/8 to 54, Dow Chemical declined 2 1/2 to 77 3/8 and Sofamor Danek Group fell 7 3/4 at 25 3/4 after the Supreme Court ruled that makers of medical devices can be sued in state courts over allegations that their products contained defects.
Overseas, Tokyo’s Nikkei-225 stock average rose 0.3% and London’s FTSE-100 rose 0.4%.
Bond yields were barely changed after lukewarm demand for a fresh batch of five-year Treasury notes. The average yield on the notes was 6.67%.
Market Roundup, D6
