Stocks Pull Back for Third Day; Dow Off 40
Profit takers had control of U.S. stocks for a third straight session on Wednesday, as the market closed broadly but modestly lower.
The Dow Jones industrial average eased 40.16 points to 8,823.82, bringing the total loss since last Friday to 1.7%.
While that isn’t a significant pullback, it breaks the momentum the market had enjoyed in its stunning rebound since early October, as worries about the global financial system have ebbed.
And precisely because those worries have ebbed, investors now are concerned that the Federal Reserve Board won’t follow up its two recent interest-rate cuts with another cut at its policy meeting on Tuesday.
“Our guess is that the Fed won’t ease at this coming meeting because the improvement in market psychology has been so pronounced that [Fed Chairman Alan] Greenspan doesn’t feel the same sense of urgency,” said Bruce D. Simon, chief investment officer at Glenmede Trust in Philadelphia.
But analysts also said that profit taking was overdue on Wall Street, given the magnitude of many stocks’ gains in recent weeks.
Losers outnumbered winners by 18 to 12 on the New York Stock Exchange and by 22 to 18 on Nasdaq.
The Russell 2,000 index of smaller stocks fell 0.9%. After rising 29% between Oct. 8 and last Friday, the Russell has fallen 1.7%--the same decline as the blue-chip Dow.
Some analysts said stocks were pressured on Wednesday by concerns over a potential new conflict between the U.S. and Iraq.
The government bond market had no effect on stocks because Treasury bonds weren’t traded: That market was closed in observance of Veterans Day.
But in the corporate bond market, Chancellor Media, a radio broadcasting company, sold a bigger-than-planned $750 million of notes in its second sale in less than two months, as investors snapped up the securities at annualized yields topping 8%.
Meanwhile, the dollar fell against the yen on speculation that a Japanese income tax cut and spending plan to be unveiled today will help the economy emerge from its worst recession in 50 years.
The dollar eased to 121.72 yen from 122.52 on Tuesday.
The package by Japan’s ruling Liberal Democratic Party is estimated to contain about $165 billion of economy-boosting measures. Also, Prime Minister Keizo Obuchi may discuss cutting the nation’s 5% sales tax next week in talks with opposition party members, legislators in Tokyo said.
The sales tax cut “would be overwhelmingly positive” for Japan and the yen, said Kathy Jones, a currency analyst at Prudential Securities.
Japan’s main stock index, the Nikkei-225, rose 2.3% to 14,428 on Wednesday.
Other Asian markets also gained, with Singapore up 5.5% and Hong Kong up 4.3%.
Among Wednesday’s highlights:
* Despite the broad market’s weakness, investors were ravenous for three new stock offerings, led by Internet firm EarthWeb. It shot up from $14 to close at $48.69.
But Internet stocks overall weakened after surging in recent sessions. Yahoo slumped $11.56 to $165, America Online slid $7.38 to $137.13, EBay dropped $14.94 to $115.94, Inktomi slid $9.38 to $120.75 and Amazon.com lost $5.13 to $126.63.
* Bigger tech stocks were a source of market strength, led by Intel, up $6.13 to a record $103.69 in the wake of its forecast of stronger-than-expected fourth-quarter chip sales.
Other winners included IBM, up $1.13 to a record $157.13; Compaq, up $1.63 to $34.50; Micron Technology, up $3.38 to $47.63; and Texas Instruments, up $5.56 to $69.44.
* Financial stocks continued to pull back, with Citigroup down $1.13 to $42.38, T. Rowe Price off $1.69 to $30.25 and AIG off $1.50 to $84.31.
* Utility stocks also sank amid worries about the future trend of interest rates. The Dow utilities index lost 1.5% to 305.44 as Edison International lost 50 cents to $27.25 and PG&E; fell 56 cents to $31.75. The index has dropped 5.2% from its recent peak.
* Consumer issues were mixed. Mattel fell $1.38 to $37.63 and Clorox lost $2.63 to $111.44, but Gillette added $1.06 to $47.44.
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Market Roundup, C7
