Dow Drops 43 Points; Tech Shares Hit Hard
Blue-chip stocks fell Monday as investors took profits after the market posted its biggest weekly gain ever last week and as bonds slid on fresh fears of higher interest rates.
The Dow Jones industrial average ended down 43.34 points at 6,660.21, giving back some of the ground from last week’s 312-point rally, which was the 30-stock index’s largest weekly surge.
The sagging Nasdaq market suffered the worst damage again as investors continued to flee the volatile technology sector.
For the second time in as many weeks, the New York Stock Exchange handled its lowest trading volume of the year as only 393 million shares changed hands, barely beating the low of 407 million last Monday. Some analysts attributed the light trading to the start of Passover.
Broader stock measures also meandered through the lifeless session before turning sharply lower in the afternoon with the bond market, where interest rates rose following some cautionary remarks by a top Federal Reserve Board official.
Fed Vice Chairman Alice Rivlin warned that persistent strength in consumer demand could aggravate inflationary pressures at the nation’s factories.
The remarks heightened fears that the central bank will try to slow borrowing and spending with a sharp increase in interest rates. That would ease demand but could also put a dent in company revenues and profits.
After Rivlin’s comments were publicized, bond prices fell, boosting the yield on the benchmark 30-year Treasury bond to 7.09%. On Friday, the long-bond yield hit 7.05%.
Analysts said Monday’s light volume and sudden downturn helped demonstrate the fragility of last week’s blue-chip rally.
“This market’s been in trouble for a while because we have rising interest rates,” said Peter Anderson, chief investment officer for the IDS Advisory Group in Minneapolis, noting that his firm expects the Fed to tighten credit three more times.
Declining issues led advancers by a 9-to-5 margin on the NYSE. The Standard & Poor’s 500-stock list fell 5.97 points to 760.37, and the NYSE composite index fell 3.24 to 399.40.
Technology stocks were hammered again, driving the tech-laden Nasdaq down 18.62 to close at 1,203.95.
“The tech stocks participated in the rally last week for about 15 minutes,” said Scott Bleier, chief investment strategist at Prime Charter Ltd. “And this market is in a near-term downtrend regardless of last week’s rally.”
Among Monday’s highlights:
* Of the Dow components, Exxon, though it beat analyst forecasts for its first-quarter profit, slipped 1/8 to 53 3/8. AT&T;, down 5/8 to 33, reported an expected 24% drop in profit.
United Technologies fell 2 3/8 to 71 5/8, IBM lost 2 3/8 to 137 3/8, and Philip Morris fell 1 3/4 to 42 5/8.
* Nasdaq was weighed down by the computer-networking sector. Cisco Systems was down 1 1/16 to 47 3/16; 3Com, down 2 7/8 to 26 3/8; and U.S. Robotics, down 5 11/16 to 45 1/16 on news that Intel, up 1 1/4 to 138 3/8, will cut prices on its competing networking products.
Other tech issues were hit hard, including KLA Instruments, down 2 1/8 to 39 5/8, and America Online, off 1 7/8 to 43 1/4.
* Other oil issues advanced. Amoco rose 5/8 to 82 after meeting earnings forecasts. Texaco rose 3/4 to 104 3/8 after it won a billion-dollar tax battle with the U.S. government.
* Drug researcher AutoImmune Inc. fell 9 7/16 to 4 5/16 after news that its drug to treat multiple sclerosis, Myloral, performed no better than a placebo in final-stage clinical tests.
In currency trading, the dollar dropped to a two-week low against the German mark as investors dumped most European currencies in favor of the relative safety of the German currency.
In New York, the dollar fell to 1.6965 German marks and 125.31 Japanese yen. Overseas, Tokyo’s Nikkei stock average rose 1.1%, Frankfurt’s DAX index rose 0.1%, and London’s FTSE-100 rose 0.4%.
Market roundup, D12
