Microsoft Warning Casts Shadow on Dow
Software giant Microsoft and other technology stocks slumped Thursday, taking the Dow Jones industrial average with them.
Bond prices were mostly down. The dollar rose against the German mark but fell against the Japanese yen. Oil prices were lower.
The Dow fell 33.39 points, or 0.36%, to 9,143.33. The blue-chip index’s drop was softened by a big rise in component Walt Disney.
Declining issues outnumbered advancers by a 5-to-2 margin on the New York Stock Exchange, where volume was heavy.
The Nasdaq composite index fell 36.22 points to 1,881.39. The Standard & Poor’s 500-stock list fell 10.96 points to 1,119.58, also ending a four-session streak of record highs.
The NYSE composite index fell 5.07 points to 580.55, and the American Stock Exchange composite index fell 5.62 points to 748.05 after setting new highs on Wednesday. The Russell 2,000 index of smaller companies fell 6.19 points to 484.95.
“The market looks like it’s in the worst technical shape I’ve seen since October,” said Richard A. Dickson, a technical analyst at Scott & Stringfellow in Richmond, Va.
The tech sector was led lower by Microsoft, whose stock rallied Wednesday as investors bet correctly that the software company would have strong earnings. Microsoft fell $4.38 to $94.50.
Analysts said the market may have been spooked by Microsoft’s warning that sales would be flat in the next few quarters.
A recent rally in Internet-related stocks suffered a big setback as leading companies in the sector tumbled. They were among the most heavily traded on Nasdaq.
Some analysts said the overall market may be ripe for a correction after rising strongly since the beginning of April.
“In the last two weeks, the averages have been running up but the market has not,” Harry Laubscher, an analyst for Tucker Anthony, said. “The generals have been advancing and the troops are running the other way, and that’s usually a formula for a market top.”
The heavy money flow into mutual funds to beat the April 15 tax deadline, followed by a broad market run-up culminating in a speculative frenzy in smaller stocks such as the Internet sector, pointed to a market groping for a trading range, Scott Bleier, chief investment strategist at Prime Charter Ltd., said.
“The market is going to take a pause and trade in a range through the course of the summer,” he said.
Added Laubscher, “The market is not looking good. We are telling people to be ready for a pretty good correction.”
Bleier forecast a 9,300 to 8,500 point range in the Dow.
Up until Wednesday’s close, the Dow and Nasdaq had notched scorching gains of 16% and 22% respectively since the start of the year.
The 30-year Treasury bond yield is once again skirting the key 6% level. There were rumors Thursday that Wall Street investment guru Warren Buffett was selling bonds.
The bellwether bond was off slightly, sending its yield, which travels in the opposite direction of the price, up to 5.98% from 5.96% Wednesday.
Among Thursday’s highlights:
* Investors spurned other big-name companies that surpassed profit expectations: American Express slid $2.94 to $103.06 as the Dow’s biggest decliner after J.P. Morgan, down $5.25 to $137.38. The latter two had rallied Wednesday amid another wave of merger speculation in the financial sector.
The dollar, meanwhile, jumped more than a pfennig against the mark, rising above 1.80 marks before settling at 1.798 marks, up from 1.794 at Wednesday’s close. It fell against the yen, easing to 130.18 yen from 130.283 Wednesday.
Oil prices fell, weighed down by evidence of abundant supplies and lack of any clear signs that world oil producers would succeed in cutting back sales.
At the New York Mercantile Exchange, crude oil for June delivery closed 35 cents lower at $15.19 a barrel..
Overseas, London’s FTSE-100 index fell 0.56%. Tokyo’s 225-share Nikkei average was virtually unchanged.
