Dow Slides as Yields, Techs Go the Other Way
Technology stocks rose after two days of heavy profit-taking, but the Dow Jones industrial average sagged again Wednesday amid fears that the impending flood of profit reports won’t justify Monday’s push above 9,000.
Meanwhile, key Asian markets rose as the dollar slid further.
U.S. stocks were pressured throughout the day by a weak bond market, as yields continued to rise after a disappointing auction of inflation-linked Treasury bonds.
The Dow index fell 65.02 points, or 0.7%, to 8,891.48, after losing 76 points on Tuesday.
In the broad market, losers outnumbered winners by 17 to 13 on the New York Stock Exchange.
But the tech-heavy Nasdaq market was stronger, as winners topped losers by 23 to 19 and the composite index added 8.30 points, or 0.5%, to 1,807.01. The index lost 56 points over the previous two-day period.
“We have a long weekend ahead of us [with the market closed for Good Friday] and a lot of earnings announcements next week, so people are pulling back a bit and waiting to see what happens,” said Robert Freedman, chief investment officer for John Hancock Funds in Boston, explaining the market’s relative weakness this week.
Pressure to take profits has been strong, with most major stock indexes already up by double-digit amounts this year.
Also, the bond market hasn’t been cooperating with stocks’ bulls: The benchmark 30-year Treasury bond yield rose to 5.89% Wednesday from 5.84% Tuesday.
Traders cited disappointment with lackluster demand for the government’s $8-billion sale of 30-year inflation-linked bonds.
The government sold the bonds at an average yield of 3.74%. The securities, first sold last year in five- and 10-year maturities, are designed to protect investors from rising consumer prices by paying a market-determined yield plus the inflation rate.
Demand for the securities was tepid, in part because inflation isn’t perceived as much of a threat now.
Bonds also were hurt by the weak dollar. It tumbled to 131.18 Japanese yen, down from 133.35 on Tuesday. The dollar’s slide, after recent strength, accelerated amid speculation that Japanese Prime Minister Ryutaro Hashimoto today will announce plans to reinvigorate that country’s sluggish economy.
A weaker dollar could discourage foreigners from buying U.S. assets.
At the same time, optimism in Asia boosted Tokyo’s Nikkei-225 stock index 2.5% to 16,376 on Wednesday. Hong Kong’s market rose 2.4% and Singapore’s gained 1.5%.
For the U.S. stock market, many analysts say first-quarter earnings reports will determine the near-term trend.
Among Wednesday’s highlights:
* Financial stocks continued to suffer profit-taking after their surge Monday on news of Citicorp’s plan to merge with Travelers Group. Citicorp eased 25 cents to $164.88 while Travelers lost $1.13 to $67.25.
Among other financial issues, Chase Manhattan lost $3.38 to $140.25, BankAmerica fell $2.13 to $84.50 and Merrill Lynch dropped $4.50 to $92.
* Drug stocks were hit by profit-taking, with Merck down $2.94 to $127.81, Pfizer off $2.06 to $98.75 and Warner Lambert down $1.31 to $177.44.
* General Electric, a leading force behind the Dow’s record-setting climb, fell $1 to $86.13 despite reporting a 13% increase in first-quarter profit.
* Among leading Nasdaq technology names, Dell Computer rose $2.63 to $65.75, and Microsoft rose $1.69 to $88.94. Internet services provider Yahoo jumped $4 to $97.25 in advance of its profit report, which came after the market close and beat expectations.
But Advanced Micro Devices slumped $3.19 to $27.31 after reporting a quarterly loss.
* Santa Monica-based Kennedy-Wilson continued to rise, gaining $6.50 to $57, as the real estate marketing and investment company said it was hired to sell a 3,000-acre parcel of land on Hawaii’s Kohala Coast, the largest fully approved development site in the state.
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Market Roundup, D8
