Stocks, Dollar Slide; Yields End Lower Again
U.S. stocks fell Wednesday for the first time in four days as investors took profits in a session marked by odd divergences in markets.
The Dow Jones industrial average lost 125.70 points, or 1.1%, to 10,991.38, though most broader indexes didn’t fall as hard.
The Nasdaq composite index gave up 0.5%; the New York Stock Exchange composite lost 0.8%.
Losers topped winners by 3 to 2 on the NYSE and by 21 to 17 on Nasdaq.
In other trading, the dollar plunged against the Japanese yen, but was nearly unchanged against the euro.
Treasury bond yields, meanwhile, ended flat or slightly lower, ignoring the dollar.
On Wall Street stocks’ three-day advance through Tuesday prompted selling by some investors who felt the market was too optimistic in the face of the expected increase in short-term interest rates next week by the Federal Reserve. Policy makers will meet Tuesday.
“Until we get some clarification of what’s going to happen next week, the equity market is going nowhere,” argued John Cleland, chief investment strategist for Security Benefit Group of Cos.
“In the current climate, it will be difficult for the market to go much higher,” agreed Robert Robbins, market strategist at Robinson-Humphrey Co. in Atlanta. “It will crawl and claw its way up, if it goes up at all.”
Still, stocks have recovered sharply from their lows of a week ago.
In currency markets, the Japanese yen surged to a new high against the euro and the strongest level in six months against the dollar on expectations that international investors will continue to pile into Japanese stocks.
The dollar plunged to 112.03 yen from 114.05 Tuesday.
“The point is that capital is flowing back into Japan, and it’s pretty apparent that the Bank of Japan is not willing to fight the trend,” said James Culnane, a trader at Norddeutsche Landesbank.
A falling dollar is potentially inflationary because it can raise the cost of imports. Also, the dollar’s losses devalue U.S. securities held by foreigners, making them less reluctant to invest here.
But while a weak dollar often hurts the U.S. bond market, that wasn’t the case Wednesday.
The benchmark 30-year U.S. Treasury bond yield dipped to 6% from 6.01% Tuesday.
Among the day’s highlights:
* Financial stocks that gained in recent days helped lead the equity market downward. American Express dropped $3 to $137.25 and J.P. Morgan lost $1.56 to $132.94.
* Tech stocks were mixed. IBM, one of the biggest gainers in recent days, fell $4.63 to $123.88.
And Applied Materials slid $6.69 to $65.06 after the leading maker of semiconductor equipment said fiscal third-quarter orders rose to $1.46 billion but fell short of analysts’ expectations.
But Dell Computer rose $3.44 to $44.56 after reporting a brisk jump in quarterly profit late Tuesday.
* Internet stocks rallied after a bullish report on the sector from Merrill Lynch.
Also, Innodata soared $11.38 to $26.38 after the provider of Internet and online publishing services said it will split its stock 3 for 1, payable Sept. 9 to shareholders of record Aug. 30. The company also authorized a stock buyback.
Bluefly gained $1.31 to $10.38 as the online designer clothing store said it signed an expanded marketing agreement with America Online.
But IVillage fell $7.13 to $45.88 after the company, which runs Internet sites for women, said it filed a registration statement with the Securities and Exchange Commission to sell 2.7 million shares.
* American Home Products rose $2.63 to $44.50 amid renewed speculation that it is a takeover target.
Market Roundup, C8
