Net Stocks Lead Broad Pullback
Stocks staged another broad retreat on Tuesday, led by Internet stocks and Internet brokerages, as bond yields continued to march higher.
The Nasdaq composite index sank 1.4%, leading most indexes lower.
The Dow Jones industrials managed to eke out a 31.35-point advance to 10,677.31 thanks to gains in a handful of stocks.
But losers swamped winners by 27 to 13 on Nasdaq and by 19 to 11 on the New York Stock Exchange. Trading remained moderate.
With Tuesday’s loss, the Nasdaq index is down 9.7% from its July 16 record close of 2,864.48.
The Dow is down less than 5% from its peak.
“The general tenor is one of malaise,” said Scott Bleier, chief investment strategist at Prime Charter Ltd.
Rising bond yields are a main culprit. The yield on the bellwether 30-year Treasury bond rose from 6.12% on Monday to 6.16% on Tuesday, matching the 20-month peak reached in mid-June.
‘I don’t see a lot to get real bullish about” for bonds, said Robert Smith, who helps oversee $525 million at Sage Advisory Services Ltd. in Austin, Texas. “We’re not very optimistic.”
Concerns have been growing that the Federal Reserve will again raise short-term interest rates to cool off the economy. Fed policymakers will meet Aug. 24.
The Conference Board on Tuesday provided the latest economic data. It said its index of leading indicators rose 0.3% in June, matching its May increase.
Bonds also are suffering from a supply glut: Some $52 billion of new debt is expected to be offered for sale in coming weeks.
Wal-Mart, the world’s largest retailer, is issuing $5 billion in bonds. Fannie Mae, the largest provider of U.S. home mortgages, plans to sell $3 billion of five-year global bonds as soon as this week.
And junk-rated borrowers are planning to sell about $4 billion of debt in the weeks ahead.
Today, the Treasury will announce details of its big bond sale planned for next week.
Meanwhile, in currency trading the dollar rose against the yen for the first time in more than a week, after Japanese Finance Minister Kiichi Miyazawa suggested Japan and the U.S. are ready to coordinate sales of yen to stem the currency’s strength.
In the stock market, rising interest rates usually mean investors reconsider the valuations on highflying stocks. That’s part of what’s weighing on Internet names.
Among Tuesday’s highlights:
* Among Internet names, America Online plunged $4.06 to $88.81, EBay dropped $6.88 to $84.38, Inktomi slid $7.81 to $99.44 and Broadcom slumped $6.31 to $111.88.
* A telecom highflier, Qualcomm, slid $12.50 to $140 after Motorola said it will make semiconductors for phones to compete with Qualcomm. Motorola fell $2.13 to $90.75.
* Some blue-chip tech stocks gained for the day, perhaps attracting money coming out of Net stocks. Intel rose $1.63 to a record $72.94, Hewlett-Packard gained $3.75 to $108.50 and Sun Microsystems gained $1.94 to $71.38.
But IBM lost $2.88 to $119.38.
* Insurance firm UnumProvident plunged $15.31 to $36.38 after reporting disappointing quarterly earnings.
* Gains in Johnson & Johnson, up $2.25 to $94.19, and Procter & Gamble, up $3.56 to $93.69, supported the Dow.
* Many biotech shares pulled back after soaring Monday. Amgen lost $2.13 to $76.63, and Gilead Sciences fell $2.44 to $72.75. But Genentech added 50 cents to $145.50.
Market Roundup, C11
