Techs Snap Back; Blue Chips Falter
Blue chip stocks slipped Thursday after three days of sharp gains, while smaller stocks, led by tech issues, closed mostly higher.
Meanwhile, the bond market rallied, with yields falling to their lowest level since late March before rising late in the session.
The Dow Jones industrials finished down 21.27 points at 6,658.60 after a midday rallied faded.
It was the Dow’s first loss since last Friday. The index had rocketed 288 points, or 4.5%, from Monday through Wednesday, finally rebounding from a drop of nearly 700 points over the prevous five weeks as interest rates rose.
Many technical market analysts had predicted that the Dow would run into resistance at the 6,700 mark, so there wasn’t much surprise at Thursday’s loss.
The good news was that the Nasdaq market of mostly smaller stocks managed to close higher, with the Nasdaq composite index adding 6.80 points to 1,217.07. Winners narrowly topped losers on Nasdaq and on the Big Board.
“I was encouraged early in the day when I saw the recent strength, which had been limited to the Dow, spreading out to the Nasdaq stocks,” said Robert Stovall, president of Stovall/Twenty-First Advisers.
But he noted that the afternoon selling that depressed the Dow also weighed on smaller issues.
The bond market gave stock investors reason to cheer early in the session, as the yield on the 30-year Treasury bond fell to a three-week low of 7.03% after the Labor Department reported that new claims for unemployment benefits rose by 8,000 last week to 332,000, highest since January.
That hinted at a slowdown in hiring and perhaps a slowdown in the economy.
Also, a report from the Philadelphia Federal Reserve Bank suggested “some signs of slowdown in the manufacturing sector” of that region, said Bill Meehan, analyst at Prudential Securities.
The reports put some doubt in investors’ minds that the Fed will raise interest rates again to cool the economy when the policy-makers next meet in May, said Terrence Piggott, bond trader at Daiwa Securities America.
Even so, profit-takers hit bonds late in the day, and the T-bond yield finished at 7.06%. That still was down from 7.09% Wednesday and the lowest since April 7.
With virtually no important economic reports due over the next week, analysts say stocks and bonds have a chance to stabilize further in the near term.
Among Thursday’s highlights:
* Key tech stocks led Nasdaq higher, even before a robust quarterly earnings report from Microsoft cheered traders after the market closed. (Story, D1.)
Microsoft rose to 102 3/4 in after-hours trading after easing 1/8 to 98 1/8 in regular trading.
The day’s big tech winners included Intel, up 4 to 138; Dell, up 1 3/4 to 77; Cisco Systems, up 2 to 49 1/2; Advanced Fibre Communications, up 2 7/8 to 35 3/4; and Novellus Systems, up 5 to 53 1/4.
* On the downside, Andrew plummeted 12 1/8 to 23 1/2 after the telecom equipment firm’s quarterly sales growth failed to match expectations. Other losers included DSP Communications, down 3 1/2 to 7 1/4, and ESS Technology, off 7 15/16 to 14 1/8.
* Airline stocks were up sharply, driving the Dow transports index to a record high. (Investor Spotlight, D7.) AMR, parent of American Airlines, surged 2 1/2 to 87 1/2 in the wake of its earnings report. Also gaining were US Airways, up 3/4 to 27 5/8; and Southwest, up 1 1/4 to 23 5/8.
* As with airlines, some industrial issues continued to rise, reflecting the economy’s strength. International Paper rose 1 1/4 to 41 7/8, Cooper Tire surged 1 3/4 to 20 1/4 and Inland Steel was up 1 1/8 to 20 7/8.
* Stocks moving on earnings reports included Amgen, up 1 3/4 to 58 3/4; Green Tree Financial, up 3/4 to 32 5/8; Kimberly-Clark, down 1 to 49; Schlumberger, off 1 to 105 3/8; and Coastcast, down 2 1/4 to 11 5/8.
* A day after news of a possible settlement of tobacco litigation that sent tobacco issues soaring, the sector fell. Philip Morris, which reported quarterly earnings up 16%, dropped 1 5/8 to 41 5/8. RJR Nabisco lost 3/4 to 32 3/4.
In commodities trading, cattle futures advanced as concern eased that “mad cow disease” threatens the U.S. cattle herd.
Cattle prices plunged Wednesday after a newspaper report said that an Indiana man died of Creutzfeldt-Jakob disease, sparking concern that his death could be the first sign of bovine spongiform encephalopathy, or BSE.
But the USDA said that it has found no evidence of BSE in American cattle.
Market Roundup, D6
