Rally in Techs Reverses Stocks’ Fall; Rates Drop
A late-afternoon technical rally pulled stocks out of a sharp decline Wednesday, allowing blue chips to finish higher.
But weak technology shares and uncertainty about the future of the economy kept the broader market mixed.
The Dow Jones industrial average, which had been down nearly 50 points, turned around in the last hour of trading thanks to computer-triggered buying programs and the perception that bargains could be had.
The Dow closed 21.79 points higher at 5,603.65, but declining issues outnumbered advancers on the New York Stock Exchange by a margin of 4 to 3.
NYSE volume totaled a brisk 421.31 million shares, up from 379.19 million on Tuesday.
The NYSE’s composite index gained 0.18 point to 351.75. The Standard & Poor’s 500-stock index rose 1.31 points to 656.06.
But the technology-rich Nasdaq composite index lost 12.40 points to 1,141.19, nearly a three-month low, while the American Stock Exchange market value index fell 4.86 points to 561.81.
“It did come back quite quickly and for a while quite vigorously, but with today’s close it really has not resolved some of the near-term damage created by weakness in technology and last Friday’s 115-point drop” in the Dow, said Eugene Peroni, director of technical research at Janney Montgomery Scott in Philadelphia.
Wednesday’s early declines were touched off by Motorola, the big semiconductor and telecommunications company, which reported Tuesday evening that its second-quarter profit was far short of analyst estimates, falling 32%. Motorola partly blamed slack demand for semiconductors.
Another negative for stocks was the Investment Company Institute report that net new cash flow into stock mutual funds slowed to $15.5 billion in June from $25.16 billion in May.
Weakness in stocks came despite another strong day in the bond market, which has recovered some ground from Friday’s steep sell-off. The financial markets tumbled that day on inflation fears generated by a surprisingly strong employment report.
The yield on the key 30-year Treasury bond fell to 7.07% from 7.12% on Tuesday.
Among Wednesday’s highlights:
* Shares of Motorola tumbled 8 1/2 to 58 after reporting a drop in earnings. Other cellular phone makers also lost: Nokia dropped 1 5/8 to 36 1/2 and LM Ericsson fell 1 19/64 to 20 29/64.
* Shares of Outdoor Systems surged 11 7/8 to 48 1/8 after agreeing Tuesday to buy Gannett’s outdoor ad division for $690 million.
* Hewlett-Packard rose 1 3/4 to 89, bouncing back from a recent sell-off that stemmed from the company’s poor earnings prospects. After the close, HP said it would discontinue disk drive manufacturing and that order growth has slowed.
* Medical products maker Conmed slumped 9, or 40%, to 13 1/2, after warning of an earnings shortfall for the second quarter. Computer Horizons, which also issued an earnings warning, tumbled 8 3/4 to 20 1/4.
* Weak technology stocks included Analog Devices, off 3 7/8 to 20 3/4, and Microsoft, off 1/2 to 119 1/2.
* Some computer-related issues bucked the trend. Ascend Communications gained 3 3/4 to 60 2/3 after the company reported a fourfold increase in second-quarter earnings because of strong international and Internet-related equipment sales.
In currencies markets, the dollar rebounded from early declines and ended unchanged in New York against the yen.
Among commodities, cotton fell after rain drenched farmlands in West Texas, where dry conditions were threatening to cut the size of this year’s crop.
And overseas, Mexico City’s Bolsa closed slightly higher, shadowing the see-saw journey of the Dow average, closing 0.058% higher.
Market Roundup, D6
