Dow Drops as Tech Issues Remain Strong
Blue-chip stocks fell Wednesday after the market tried but failed to smash through the next psychological barrier of 9,000 points in the Dow Jones industrial average.
The Dow fell 31.64 points to 8,872.80, reversing directions after a morning surge pushed it up nearly 55 points to within 41 points of 9,000. The index of blue-chip stocks has been unable to hold on to its gains since Friday, when it ended a weeklong climb of 300 points to close at a record 8,906.43.
Computer-driven selling of stocks followed a price decline in the bond market, which was dragged down by a disappointing auction of five-year Treasury notes and a surprisingly strong report of home sales. But technology issues, led by Microsoft, and small stocks held on to gains, sending the Nasdaq composite index and the Russell 2,000 list of small stocks to record highs.
Oil prices got a boost from OPEC’s decision to convene an emergency meeting Monday in Vienna to ratify an agreement to cut production.
Rilwanu Lukman, secretary-general of the Organization of Petroleum Exporting Countries, did not say whether OPEC will consider cutting formal production quotas, which were boosted 10% at its last meeting in November to 27.5 million barrels a day. Oil prices have slumped as much as 35% since then.
Oil for May delivery rose 56 cents to $16.48 a barrel on the New York Mercantile Exchange.
On Wall Street, the early rise in stocks followed the Commerce Department report on durable orders, confirming investors’ contention that inflation remains in check.
The Dow backed down somewhat after the National Assn. of Realtors reported at midmorning that home sales soared 8.7% to a new record last month. Analysts had expected an increase of less than 1%.
“The big boys have been selling bonds pretty rapidly here,” said Ned Collins, head of stock trading at Daiwa Securities America in New York. “It doesn’t take much to move these markets.”
The 30-year Treasury fell 7/8 of a point, or $8.75 on a $1,000 bond, while the yield, which moves in the opposite direction, rose to 5.94% from 5.88% Tuesday.
The decline in bonds, which pushes up interest rates, carried over to bank stocks. Citicorp slid $2.19 to at $132.94, and BankAmerica skidded $1.19, to $83.88.
Drug stocks, among the biggest beneficiaries of the stock run that began in October, also fell from favor. Merck led decliners among the 30 Dow industrial stocks, down $1.88 to close at $130.
Microsoft boosted tech stocks with a statement late Tuesday that its first-quarter profits would top analysts’ expectations. IBM, up $2.56 to close at $106.016, led Dow gainers. Microsoft surged $4.06 to $89, Dell Computer climbed $2.19 at $67.94 and Intel rose $1.81 to $76.25.
Broad market indexes were mixed, with the technology-laden Nasdaq index rising 12.07 points to 1,824.51, and the Russell 2,000 edging up 0.88 point to 477.14--both reaching new highs.
The Standard & Poor’s 500 list fell 3.72 points to 1,101.93, the NYSE composite index fell 2.20 to 572.76, and the American Stock Exchange composite index sagged 1.80 to 736.89.
Among Wednesday’s highlights:
* Apria Healthcare Group tumbled $2.31 to $8.88, or 21%, after the beleaguered home health-care company disclosed that a major cash infusion from a New York investment house is in jeopardy. The company said late Tuesday that it was suing Joseph Littlejohn & Levy, claiming the investment house and its partner were refusing to go through with a $172-million investment in the Costa Mesa firm without major revisions in their deal.
* Mattel fell $2.56 to $40.88, after the toy maker said it expects relatively flat first-quarter sales.
* 3Com fell $1.75 to $35.50 after the computer network equipment firm reported fiscal third-quarter operating results that were well below analysts’ expectations.
