Techs Lead Wall Street Lower; Yields Decline
Despite a pullback in bond yields after their surge to six-month highs on Thursday, Wall Street got something else to worry about Friday: fresh weakness in tech stocks.
The Nasdaq composite index slumped 38.79 points, or 1.7%, to 2,288.03 as leading tech shares tumbled after analysts warned of a sales slowdown at Compaq.
Blue chips also took a hit, though the Dow Jones industrial average’s final loss of 59.76 points, or 0.6%, to 9,306.58 was pared from a drop of as much as 114 points.
The broad market didn’t fare as badly as the indexes might suggest: Losers had only a modest edge over winners on the New York Stock Exchange and on Nasdaq.
NYSE trading volume, at 785 million shares, was up from Thursday but still below average.
The market traded lower in the morning even though bond yields fell from Thursday’s highs.
Bond buyers were lured by the highest yields since last August, traders said--and by the government’s revised report on fourth-quarter economic growth, which showed that a key inflation gauge rose 1% last year, the smallest increase since 1949.
Another sign of the lack of inflation pressures: The CRB/Bridge index of 17 key commodities fell 1% on Friday to 182.95, its lowest close in 24 years, led down by orange juice and soybean oil.
Because bond yields are eroded by inflation, a low inflation rate means the “real” return on bonds can be more significant.
Some bond traders, having pushed the 30-year Treasury bond yield from 5.1% on Jan. 1 to 5.65% by Thursday on worries that the U.S. economy may be overheating, rushed back in on Friday.
By the close of trading the 30-year T-bond yield was at 5.58%. That was still up sharply from 5.39% a week ago.
Shorter-term yields also eased. The 2-year T-note dipped to 5.15% from 5.22% Thursday.
But bonds face another big test next week: On Friday the government reports on February employment trends, which could point to more strength in the economy.
For the stock market, the focus now will be on whether technology stocks--the market leaders of the last year--can shake off the latest concerns about slowing sales growth.
On Feb. 17 Dell Computer led tech stocks lower after it reported weaker-than-expected sales growth.
On Friday at least two analysts warned that Compaq, too, is facing weaker growth. That sent Compaq shares down $5.63 to $35.38 and pulled many other big tech names down with it.
“Given the fact that the tech sector is very pricey, a little spark is all that’s needed,” said Vikrum Kapur, vice president of research and sales at Guzman & Co.
Ongoing declines in tech stocks in recent weeks have helped drag the Nasdaq 100 index--which is loaded with tech names--down 9.7% from its record high reached on Feb. 1.
The Nasdaq composite, meanwhile, is off 8.8% from its Feb. 1 peak. Yet it actually inched up 0.2% last week, despite Friday’s loss.
The Dow lost 0.4% last week and is off 3.5% from its record high reached on Jan. 8.
Among Friday’s highlights:
* The tech sector’s biggest losers included Apple, down $2.13 to $34.81; IBM, off $3.88 to $169.75; Microsoft, down $3.38 to $150.13; Sun Microsystems, off $5.38 to $97.31; and Texas Instruments, down $7.06 to $89.19.
Also, Applied Materials, which makes equipment used to manufacturer computer chip, tumbled $8.13 to $55.63.
* On the upside, Intuit vaulted $9.38 to $98.94 as the personal-finance software company reported better-than-expected earnings, buoyed by sales of its Turbo Tax tax-preparation software.
And VLSI Technology soared $4.75 to $15.50 as Philips Electronics offered to buy the chip maker for $17 a share.
* Despite the carnage in big tech issues, Internet stocks were mixed, with Amazon.com gaining $3.13 to $128.13 and America Online up $1.75 to $88.94, while Inktomi slid $2.88 to $62.13.
PcOrder.com, which provides a system for computer equipment makers to buy and sell computer products over the Internet, more than doubled in its first day of trading. The shares soared $26.13 to $47.13. The ticker symbol is PCOR.
* Some financial stocks gained as bond yields eased. Citigroup climbed $2.13 to $58.75, Merrill Lynch added $1.75 to $76.75 and American Express was up 63 cents to $108.50.
Bank One gained $1.56 to $53.75 as analysts said the fifth-largest U.S. bank’s credit card business is making strong inroads on the Internet, and may have an early lead in lending money and getting new customers through the Web.
* Navistar International shot up $3.56 to $43 amid Swedish news reports of an imminent takeover bid by Volvo, the world’s second-largest truck maker. Those talks have been rumored for weeks.
* Some retail stocks were strong as investors bet on continued strong consumer spending. Winners included Kroger, up $2.13 to $64.69; Ross Stores, up $1.88 to $45.75; and Abercrombie & Fitch, up $2.31 to $76.
* Drug stocks rallied. Pfizer rose $1.06 to $131.94, Lilly added $1.25 to $94.50 and Warner Lambert gained $1.56 to $68.81.
In currency trading, the dollar fell to 119.17 yen after Japanese Finance Minister Kiichi Miyazawa said he won’t ask the Japanese central bank to buy more government bonds to push down yields, which economists have argued would help revive growth.
Market Roundup, C4
