Stocks Ease After Latest Record Run
U.S. stocks closed mostly lower Tuesday amid another earnings warning from a leading blue-chip firm, and as profit takers took a little money away after Monday’s big rally.
The Dow Jones industrials slipped 43.84 points, or 0.4%, to 9,963.49 after soaring 174.82 points to a record 10,007.33 on Monday.
Most other indexes also fell, but the Nasdaq composite eked out another new high, adding 3.11 points to 2,563.17.
Meanwhile, in foreign trading, most key markets rallied strongly, with British stocks hitting a record high on expectations that British and European interest rates will be cut later this week.
On Wall Street, Gillette provided the latest sobering influence for a giddy market: Its warning late Monday about a first-quarter profit shortfall sent its shares crashing $7.75 to $50 on Tuesday, a 13% drop.
In the broad market, losers outnumbered winners by 3 to 2 on the New York Stock Exchange and by 24 to 15 on Nasdaq.
Still, the Dow had managed to rally at midday, reaching a peak of 10,030.37.
Gillette joined blue-chip multinational peers Coca-Cola and 3M in warning that business abroad is a drag on profits.
With stocks near record highs, “there’s no room for error,” said James Weiss, head of stock investments at State Street Research & Management in Boston.
Even so, there is room for optimism about U.S. corporate earnings overall in the first quarter. Operating earnings (profit before any one-time gains or losses) of the Standard & Poor’s 500 companies are expected to grow 6.7% in the quarter, according to analyst estimates compiled by First Call.
“First-quarter earnings are going to be pretty good,” said Greg Smith, chief investment officer at Prudential Securities Inc.
The bond market provided some good news Tuesday, as yields ended mostly lower. The bellwether 30-year Treasury bond yield ended at 5.52% versus 5.59% on Monday.
“The main driver for Treasuries at the moment is the inflation outlook,” said Gianpaolo Mosconi, a fixed-income analyst at Sanwa International in London. “If inflation stays under control, bonds should hold up OK.”
If buyers were sidelined in the U.S. stock market Tuesday, they weren’t overseas. Britain’s FTSE-100 stock index soared 1.4% to a record 6,415.30, German stocks jumped 1% and French stocks gained 1.8%.
The Bank of England meets Thursday and is widely expected to cut interest rates. The European Central Bank also meets Thursday, and it, too, is expected to cut rates to boost economic growth.
Latin American and Asian stocks markets also were generally strong Tuesday.
Among the highlights:
* Intel led semiconductor shares higher with a gain of $2.94 to $130.44, after analyst James Barlage at Lehman Bros. said the industry’s recovery from its worst recession ever is picking up steam.
“A multiyear bull market is under way in semiconductor stocks,” Barlage said.
Other winners Tuesday included Micron Technology, up $2.25 to $53.75, and LSI Logic, up $3.50 to $36. Also, Alpha Industries rose $7.13 to $25.88 after the maker of semiconductors for wireless phones said it received increased production orders from Motorola.
* Equipment suppliers to chip firms also rose. Applied Materials surged $2.19 to $67.94.
* In the Internet sector, DoubleClick rocketed $25.44 to $121 as the Net advertising company was rated “strong buy” by an analyst at CE Unterberg Towbin.
Also advancing were EBay, up $3.25 to $152, and Inktomi, up $15.75 to $106.25.
* General Motors, the world’s largest auto maker, surged $3.50 to $91.06 amid optimism about car sales. Ford Motor, the second-biggest, said U.S. car and light-truck sales rose 14% in March, beating expectations.
*
Market Roundup, C7
