Tech Stocks Dip on Delay by Microsoft
A sell-off in technology shares, triggered by an announcement of delays in the roll-out of Microsoft’s Windows 98 software, undermined a rising stock market Monday as sentiment turned bearish in the final hour of trading.
The Dow Jones industrial average fell 21.83 to 7,721.14, erasing the nearly 52-point gain from earlier in the day. Broad-market indexes also weakened late in the day. Bond yields fell.
Meanwhile, the dollar fell to its lowest level against the mark in two months Monday on German interest rate worries.
The steep fall in Microsoft shares ignited the late-day decline, and other bellwether technology stocks soon followed, including Intel, IBM and Cisco Systems.
Microsoft shares started the day lower on a Barron’s report that said the software giant’s stock was overvalued and that the company may have a hard time dominating the industry in the future.
But the big decline came at midafternoon, when Microsoft said its Windows 98 software will come out three months later than expected to give testers more time to root out bugs in the program.
Microsoft fell $7.25 to close at $130.69 on Nasdaq on the news. Other technology stocks also slumped, including Intel, down $2.19 to $92.06, and Cisco Systems, down $2.50 to $69.75, both on Nasdaq. IBM fell $1.50 to $96.25 on the New York Stock Exchange.
“We saw a sobriety check go on in the market,” said Larry Wachtel, a market analyst at Prudential Securities. “After the Microsoft announcement, investors began to question their positions with these wild tech stocks.”
Besides the Microsoft news, there was little else moving the market Monday. Most investors were cautious with their trades ahead of today’s session, when the government reports on consumer prices for August and the Federal Reserve Board releases its monthly report on industrial production.
Investors and economists will scour the new data for hints of the economy’s direction. In March, the Fed raised interest rates to forestall inflation, and investors fear another hike will come late this year.
Higher interest rates raise corporate and consumer borrowing costs, which in turn depress revenues and profits.
Advancing issues outnumbered decliners by a 6-5 margin on the NYSE, where volume totaled 467.48 million shares as of 4 p.m., down from 543.35 million Friday.
Bond prices rose Monday in quiet trading as investors awaited key reports on the economy for more clues about the possibility and timing of another interest rate increase by the central bank.
The price of the 30-year bond rose $1.88 per $1,000 in face value. Its yield, which moves in the opposite direction of price, slipped to 6.57% from 6.58% late Friday.
The dollar fell against the mark after comments from Bundesbank President Hans Tietmeyer heightened speculation that Germany would soon raise interest rates.
The Standard & Poor’s 500-stock list fell 4.14 points at 919.77, the NYSE composite index fell 0.70 point at 482.60. The Nasdaq composite index fell 14.41 points to 1,634.92, weighed down by the tech sell-off.
The Russell 2,000 index of smaller companies rose just 0.08 point to 440.17, but that was enough to set a record high for the 11th time in 13 sessions.
The American Stock Exchange composite index, which is dominated by smaller companies, rose 2.35 to 674.66, for its second straight record close.
Overseas, Frankfurt’s DAX index fell 3.4% and London’s FTSE-100 rose 1.1%. Tokyo’s markets were closed for a national holiday.
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Market Roundup, D12
