Nasdaq’s Rally Ends; Dow Off 105

The first real wave of profit-taking hit the summer stock rally Tuesday, slicing more than 100 points off the Dow and preventing a 10th consecutive Nasdaq record.

The Dow Jones industrial average fell 105.56 to 9,190.19. An early 48-point gain had briefly put the blue-chip barometer above Friday’s closing record of 9,337.97.

Most broad-market indicators also turned negative before midday, but the selling remained fairly modest until mid-afternoon.

In fact, the Nasdaq composite index was still flirting with record highs less than two hours before the closing bell, but the technology-heavy measure finished 35.11 lower at 1,979.14, snapping a nine-session streak of closing records.

Analysts said the sell-off was at least partly triggered by Tuesday’s remarks to Congress by Alan Greenspan, in which the Federal Reserve chairman dashed hopes the central bank might cut interest rates soon to stimulate a slowing economy.

Greenspan, delivering his midyear report to Congress, noted that some analysts say the economy, as measured by the gross domestic product, may have actually shrunk in the just-ended second quarter, but asserted that inflationary pressures are still a bigger worry.

“People were kind of hoping he would be friendlier toward easing Fed (interest-rate) policy and he was anything but that,” said Dan Ascani, president and research director at Global Market Strategists in Gainesville, Ga., noting Greenspan’s suggestion that some earnings forecasts may be “discounting the hereafter.”

“Investors have been too optimistic about earnings,” said Ascani. “Given the Asian (financial crisis), declining earnings growth, the fact that the GDP could go negative, and add in Greenspan’s indication that the Fed is still on a tightening bias, and you have the formula for a sell-off.”

Bond yields fell, however, as investors were optimistic that the central bank wasn’t ready to boost interest rates soon. Bond yields also fell thanks to a surging dollar and by investors seeking safety from the falling stock market. The yield on the benchmark 30-year Treasury bond fell to 5.66% from 5.71% late Monday.

Among Tuesday’s highlights:

* Bellwether technology issues, including many of the top performers over the past month, suffered substantial losses despite an encouraging second-quarter profit report by IBM.

IBM surged 6 1/8 to 128 1/8 as the Dow’s strongest component after topping Wall Street forecasts late Monday, but that gain was negated by Merck, which failed to meet expectations with its latest result. The drug maker’s shares plunged 9 13/16--or the equivalent of 39 Dow points--after Tuesday morning’s report.

Among the leading Nasdaq technology names, Dell Computer fell 5 7/32 to 110 25/32, Microsoft fell 4 7/32 to 112 25/32, and Cisco Systems fell 4 9/32 to 98 29/32.

Some Internet stocks also fell. Amazon.com fell 5 7/16 to 132 1/16, America Online fell 5 5/8 to 130 1/2, Cnet fell 8 1/8 to 62 1/8, EarthLink Network fell 2 1/32 to 40 7/8, and Yahoo! fell 7 5/16 to 189.

* Financial shares suffered a similar fate despite some better-than-expected profit reports from Chase Manhattan and merger partners Citicorp and Travelers Group. Chase fell 3 1/2 to 71 1/2, Citicorp fell 8 7/8 to 172, and Travelers fell 3 5/8 to 69 as the Dow’s second-weakest issue. Wells Fargo fell 9 3/8 to 370 5/8.

Declining issues outnumbered advancers by a 2-to-1 margin on the New York Stock Exchange, where composite volume totaled a hefty 802.06 million shares, up from 691.07 million on Monday.

The Standard & Poor’s 500 fell 19.03 to 1,165.07, and the NYSE composite index fell 8.54 to 590.67. It was the second straight losing session for both measures, which closed at record highs on Thursday and Friday.

Market Roundup, D9