Techs Plunge Again; Dollar Loses Little
Another deep sell-off in leading computer networking stocks dragged the Nasdaq market overall sharply lower Monday and clipped the broader market as well.
Meanwhile, in currency trading, the dollar initially plunged against key currencies, after Saturday’s meeting of global economic officials ended with a veiled threat to halt the greenback’s rally if it continued unchecked.
But by the end of the day the dollar had trimmed most of its losses as bargain hunters emerged and investors re-examined the apparent intentions of the Group of Seven industrialized nations.
On Wall Street, the Nasdaq composite index, heavy with tech issues, tumbled 22.37 points, or 1.7%, to 1,335.34, its lowest since Jan. 15.
The Dow Jones industrial average also sank, losing 49.26 points, or 0.7%, to 6,806.54.
Losers topped winners by 24 to 17 on Nasdaq, though losers had only a narrow 13 to 12 edge on the New York Stock Exchange.
Tech stocks were hammered by another downbeat announcement from the hitherto fast-growing computer networking business: 3Com, a leading networker, warned of weaker earnings growth ahead. Its shares plunged 13 1/2 to 37 1/4, and most other networkers plummeted as well.
The sell-off extended a recent slide for major technology companies, a sector that had led the way as the market marched higher in recent months. “Fear is mounting that some of these companies won’t be able to keep up with 1996 growth rates,” said Richard Jandrain, director of equities at Banc One Investment Advisors.
“You’re seeing a lot of stocks get beat up, stocks that had been the winners of the last 12 months,” said Don Hays, director of investment strategy at Wheat First Butcher Singer in Richmond, Va. “People are anxious to take some of that money they’ve made and put it on the sidelines.”
Energy stocks, another winning sector in 1996, also have been sliding in recent weeks, and they sank further Monday.
In the bond market things were relatively calm, with yields ending mostly unchanged ahead of the Treasury’s big quarterly note and bond sales this week, which begin today with an auction of three-year notes.
The yield on the Treasury’s 30-year bond edged up to 6.70% from 6.69% on Friday.
As for the dollar, it dropped sharply, as expected, early Monday in the wake of the G-7 meeting Saturday, where the United States and other countries indicated that they did not believe the recently streaking U.S. currency should advance further against the German mark and Japanese yen.
After hitting a four-year high against the yen and a 2 1/2-year high against the mark on Friday, the dollar fell as low as 120.50 yen early Monday before rising to settle in New York at 122.78 yen, actually higher than Friday’s close of 122.60.
The dollar also ended in New York at 1.6562 marks, down modestly from 1.6625 on Friday.
“You’re seeing some jawboning to slow the rapid rise of the dollar, but interest rate differentials still favor” the U.S. currency, said Russ LaScala, manager of spot currency trading at Citibank in New York.
Relatively high interest rates in the U.S. and the strong American economy lure investors to deposits and other investments in dollars, analyst note.
Among Monday’s highlights:
* Among tech issues, Cisco Systems slid 5 1/8 to 58, Xylan lost 1 1/4 to 19 1/8, Intel gave up 4 3/4 to 151 5/8, Compaq plunged 5 1/4 to 77 3/8, IBM dropped 6 to 142 3/4 and Seagate was off 2 1/2 to 48.
But Chatsworth-based Plasma & Materials Technologies rose 3 1/4 to 15 1/8 after the semiconductor equipment company said it developed a way to increase chips’ speed.
* Spreading weakness in energy stocks took down Mobil 2 7/8 to 126 3/8, Halliburton down 2 3/4 to 65 3/4 and Sonat down 2 to 49 1/8.
* On the upside, Sears rose 1 1/2 to 53 after Merrill Lynch said any weakness in the stock is a buying opportunity, citing strength in the retailer’s profit margins.
Many other retail issues also advanced.
* Many telecom shares advanced as high-tech investors looked for a less risky place to invest. MCI Communications rose 5/16 to 36 11/16, Sprint gained 5/8 to 4 1/4, Nynex jumped 1 1/8 to 52 3/8 and Bell Atlantic gained 1 5/8 to 69 3/4.
