Dow Retreats 21 as Stocks Give Up Gains
The stock market closed on a down note Wednesday as the Dow Jones industrials lost a fight to extend a two-day rally that had made up about a third of the ground lost in a monthlong slide from record highs.
The Dow average closed down 21.37 points at 8,693.28 after bouncing between negative and positive territory all day.
U.S. Treasuries closed narrowly mixed. The yield on the benchmark 30-year Treasury bond closed unchanged at 5.55%.
In currency trading, the dollar fell to 143.93 Japanese yen from 145 on Tuesday. It was also down at 1.7977 German marks from 1.8015.
Broad U.S. market indexes, which were mixed all day, ended lower as well, after a negative earnings projection by LSI Logic outweighed a positive earnings report from Dell Computer.
Declining issues outnumbered advancers by a 7-5 margin.
The Dow had gained 289 points on Monday and Tuesday after having slid last week to 10% below its record high, set July 17.
There were too many negative factors at work in the market to extend that 290-point rally, said Larry Wachtel, market analyst at Prudential Securities.
“This is not exactly a happy news background, given the president’s wobblies, Asia’s continuing to crater, no solutions in Japan are in sight, and there are earnings disappointments,” he said.
Investors also are wary about Russia’s economic troubles and the dollar, which was lower amid signs that Japan may be ready to intervene in currency markets to support the yen.
Hugh Johnson, chief market strategist at First Albany Corp., said the lower dollar meant the stock market didn’t get any help from foreign buyers of dollar-denominated securities, as it had on Monday and Tuesday.
In addition, Johnson said the Commerce Department’s report that housing starts rose an unexpectedly strong 5.7% in July was “a little troubling” because it stirred fears that the Federal Reserve might raise interest rates to cool the economy.
The Dow transportation average, which was buoyant for most of the session, took a dive near the close after Delta Air Lines’ refusal to give its pilots union a voting seat on the board scuttled plans for a joint venture between Delta and United Airlines.
Delta shares dropped $3.50 to $121.44. UAL, United’s parent, fell $3 to $71.06.
Dell, meanwhile, rose $8.38 to $117.94 and was the most active Nasdaq issue, after the company said late Tuesday that its second-quarter net earnings jumped 62%.
Dell’s positive news was overshadowed by LSI’s announcement that it expects third-quarter per-share earnings in the “low to mid-teens,” well below analysts’ estimates of 23 cents. LSI lost $2.44 to close at $15.81.
The Standard & Poor’s 500 fell 3.14 points to 1,098.06, and the Nasdaq composite index fell 12.43 points to 1,842.69.
The NYSE composite index fell 1.98 points to 550.05, and the American Stock Exchange composite index fell 4.43 points to 665.59. The Russell 2,000 index of smaller stocks fell 5.45 points to 405.84.
Among Wednesday’s highlights:
* Gemstar International Group rose $1.38 to $41.38 as the Pasadena-based maker of software and other technology for interactive TV said it will buy back as much as $100 million of its common stock in the open market.
* Granite Construction fell $4.31 to $27.13 on doubts that the nation’s No. 1 highway contractor can maintain its earnings performance, analysts said.
Overseas, London’s FTSE-100 index rose 0.8% and Hong Kong’s Hang Seng surged 5.71%.
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Market Roundup, D8
