Stocks Fall on Profit-Taking; Yields Decline
Stocks fell sharply Friday, nearly pulling the Dow Jones industrial average below 9,000, as the imminent conclusion to profit-reporting season left the market with fewer prospects for more record-setting gains.
The dollar rose against the Japanese yen but slipped against the German mark. Bonds ended higher.
The Dow Jones industrial average fell 78.71 points, or 0.86%, to 9,064.62, pulling back from Tuesday’s high of 9,184.94. It lost 102.88 points for the week.
Broad-market indicators also sank for the second straight day as investors locked in more gains from the stock market’s latest foray into record territory. The Dow, which sank 33 points on Thursday, closed at a record 9,184.94 on Tuesday, in part because of strong first-quarter reports from top U.S. firms.
“As people digest earnings that have been flooding in, they have begun to think forward and see earnings being revised toward the downside,” Harvey Hirshhorn, chief economist and investment strategist at Stein Roe & Farnham, said.
Underscoring the growing sentiment that there’s more risk than potential on the short-term horizon, J.P. Morgan recommended that its clients trim their exposure to stocks, raise some cash and shift some money to bonds,
“We don’t think the wonderful bull market is over, but we think we’re in for a pause,” said Douglas Cliggott, J.P. Morgan’s chief investment strategist. “First-quarter earnings are coming in above deflated expectations, but only slightly higher than year-earlier levels.”
The technology-heavy Nasdaq index fell 12.43 points to 1,868.96 after running up Wednesday to a high of 1,917.61.
Declining issues outnumbered advancers by more than a 2-to-1 margin on the New York Stock Exchange in heavy trading.
The Standard & Poor’s 500-stock index fell 11.68 points to 1,107.90, and the NYSE composite index fell 6.08 points to 574.47. The Russell 2,000 index of smaller companies fell 4.63 points to 480.32.
U.S. bonds rose, snapping a four-day slump, as the dollar’s rally against the yen boosted the appeal of Treasury securities.
The yield on the benchmark 30-year Treasury bond fell to 5.94% from 5.98% on Thursday.
The dollar rose against the yen amid expectations that a $128-billion Japanese government plan announced earlier Friday won’t go far enough to pull the economy out of a seven-year slump. The dollar rose about 1.1% to 131.16 yen from 130.18 on Thursday.
The currency and bond markets in the U.S. have “grown weary of these proposals,” said Vic Thompson, who oversees about $150 billion in bonds for State Street Global Advisors in Boston. “We’ve taken the Missouri stance--show me it’s going to work before I believe it.”
Among Friday’s highlights:
* The Dow’s slide came despite a huge gain from Hewlett-Packard, which soared $8--or the equivalent of more than 30 Dow points--to $74.63 after a recommendation from Prudential Securities. Merck negated about half of that gain, falling $3.88 to $116.50.
* Helping to drag down Nasdaq were Intel, off $1.19 to $82.06, and Microsoft, down $2.38 to $92.13.
* Impotence drug companies rose. Vivus rallied $1.25 to $12.75 on optimism that some men will turn to its impotence treatment because Pfizer’s Viagra won’t work for them. Pfizer gained $2.88 to $118.25.
In commodities trading, platinum and palladium led precious metals prices lower after news that Russia’s parliament finally accepted President Boris Yeltsin’s choice for prime minister, a move that could free up metals exports.
Palladium for June delivery at the New York Mercantile Exchange closed $3.05 an ounce lower at $312.90 after falling the daily allowable limit of $12 on the Russian news.
July platinum ended down $6.10 an ounce at $409.80.
Market Roundup, D4
