Dow Tumbles 119 Despite Tech Rally
Blue chips gave back some of their recent heady gains Wednesday, as investors balked at taking the Dow Jones industrials over the 8,000 mark just yet.
But many key technology shares rallied as optimism rose about second-quarter earnings.
Elsewhere, Southeast Asian markets were hit by selling amid growing worries over currency stability.
On Wall Street, the Dow traded lower almost from the start, after surging 103.82 points on Tuesday to a record 7,962.31.
Selling late Wednesday pushed the index down 119.88 points, or 1.5%, at the close, to 7,842.43.
Falling stocks outnumbered winners by 17 to 11 on the Big Board in heavy trading.
Smaller stocks, however, declined only modestly. The Russell 2,000 index of smaller shares eased 0.88 point to 397.40. And the tech-heavy Nasdaq composite inched up 1.53 points to a record 1,486.63.
As usual, analysts said, computerized program selling aggravated the Dow’s movement late in the day. But others said more investors may simply be growing uneasy about the market’s heights, with the Dow still up 22% this year.
“It might have registered in some people’s consciousness that 8,000 was pretty high,” said Charles Pradilla, an analyst at Cowen & Co.
“We’ve been net sellers of stocks for the last few weeks,” said Bruce Sherman, president of Private Capital Management in Naples, Fla., which manages $1.6 billion. “The market is not cheap.”
Yet the bond market continues to provide support for stocks: The 30-year Treasury bond yield eased to 6.56% on Wednesday from 6.58% on Tuesday. It is nearing its 1997 low of 6.52% set in February.
And concern about a resurgence of inflation is hard to find on Wall Street--as the results of the Treasury’s auction of new five-year inflation-protection notes Wednesday showed.
The $8-billion auction was met by poor demand, dealers said, forcing the government to pay a yield of 3.74% on the notes, well above the expected 3.54%.
The yield represents the “real,” or after-inflation, return on the notes, since the government guarantees to adjust note owners’ principal to compensate for the inflation rate. But because inflation is so subdued, dealers say, relatively few investors are clamoring for inflation-protection securities.
Among Wednesday’s highlights:
* Blue chips pulling the Dow lower included AlliedSignal, down $2.50 to $84.88; DuPont, down $1.94 to $63.12; and Merck, off $2.75 to $101.19.
* Energy stocks were broadly lower amid concern that world oil prices may decline soon on plentiful supplies. Exxon lost $1.63 to $61.94, Mobil fell $2.69 to $69.94 and Unocal sank $1.81 to $37.
* On the plus side, strong earnings reports in the tech sector boosted Yahoo $4.25 to $44 and Motorola $3.50 to $86.
Other tech winners included Intel, up $3 to $152.63; Compaq, up $1.63 to $121; Texas Instruments, up $3.94 to $95.75; and DSC Communications, up $3.94 to $26.06.
* Wells Fargo led bank stocks lower after the company warned that its second-quarter earnings will be far lower than expected. Wells plunged $18.38 to $260.63. Among other banks, BankBoston fell $1.06 to $75.75, BankAmerica fell $2 to $66.19 and Citicorp lost $1.63 to $126.56.
In Southeast Asia, stocks fell broadly after speculators again tried to push the Philippine peso lower, targeting that country for currency devaluation one week after troubled Thailand devalued.
Early today, the Philippine central bank raised short-term interest rates to 32%, the highest in 2 1/2 years, to defend the peso.
In Manila, the key stock index tumbled 4% to 2,589 on Wednesday. The main Malaysian stock index dropped 2.3%, and Singapore’s main index slid 1.2%.
