Dow Plunges 218 as Blue Chips Suffer a Sell-Off
How about Dow 9,500?
A broad-based sell-off drove the Dow Jones industrial average down more than 200 points Tuesday and dimmed chances that the blue-chip indicator will close above the much-hyped 10,000 mark any time soon.
Profit-taking in previously leading stocks such as General Electric pushed the Dow down 218.68 points, or 2.2%, to 9,671.83.
The Nasdaq composite index suffered even greater damage, sinking 73.10 points, or 3.1%, to 2,322.84 as major technology stocks got clobbered again.
Analysts said the market slump had no specific trigger but, rather, that it stemmed from a confluence of worries over issues such as the imminent U.S. military involvement in Kosovo, weak corporate earnings and oil exporters’ latest decision to rein in production.
Selling hit just about every corner of the market, including financial, retail and Internet stocks, all of which had been strong lately. Declining stocks overwhelmed gainers by a 7-2 margin on the New York Stock Exchange.
Institutional investors, trying to lock in first-quarter gains for shareholders, appeared to be heavy sellers, some traders said. That would account for the big declines Tuesday in some of the market’s hottest blue-chip shares so far this year.
Excitement soared on Wall Street last week when the Dow pushed above the 10,000 milestone three times during trading, said Larry Rice, chief investment officer at Josephthal & Co. in New York. But when the index repeatedly backed away, investors started to focus on the market’s negatives--including record-high stock valuations and the fact that most small- and mid-sized stocks have continued to stumble this year even as a handful of large-company stocks have pushed higher.
“You just had no margin for error at that point,” Rice said of the Dow’s failure to close above 10,000. “Put all these things together and you’ve got a little correction.”
Many analysts doubt that an extended pullback is at hand. But NYSE volume jumped 24% to 819 million shares on Tuesday, indicating that selling pressure may be picking up.
Market experts also say there’s little good news on the immediate horizon that might bolster investor sentiment. In addition, the final weeks of a quarter often are weak as companies pre-announce bad news on earnings.
“This has been a period of great expectations, and expectations may be moderating now and going back to normal,” said Alan Ackerman, market strategist at Fahnestock & Co. in New York. Nevertheless, “it appears to me at this point to be a [temporary] consolidation rather than a full-blown correction.”
Market weakness Tuesday was most apparent in stocks that until recently have been leading their sectors. That’s an indication that end-of-quarter profit-taking--rather than a major reassessment of company prospects--may be playing a key role in driving stocks down.
GE, for example, fell $3.81 to $106.56 two days after hitting a new high. Fellow Dow stock General Motors sagged $4.69 to $85.56; and Wal-Mart dropped $2.81 to $90.50, in its third straight decline after hitting a series of new highs.
The same pattern occurred among tech stocks. Microsoft, which had flirted with its old high Monday, gave back $6.25 to $166.56. But Intel, which had slumped late last month, eased only 56 cents to $114.56.
Coca-Cola became the latest big-name stock to suffer from earnings concerns. Shares of the soft-drink giant skidded $1.81 to $65.88 after two Merrill Lynch analysts said Coke could face slowing sales because of weakness in Latin America and Asia. Merrill trimmed its first-quarter earnings estimate for Coke to 31 cents from 32 cents a share.
Though down on their list of worries, the prospect of air strikes in Kosovo also spooked investors who fear a conflict could be more drawn out than the recent U.S. bombing raids on Iraq. Any deaths of U.S. soldiers would further unsettle the market, analysts said.
“My fear is, is this just a one-day strike or a strike over a [limited] period of time, or will we have to commit ground forces?” Ackerman said.
Other world markets also were weak Tuesday, with German stocks falling 2.2%, Taiwan’s market off 1.4% and Mexican shares down 1.8%.
In other trading Tuesday, Treasury bond yields fell. The yield on the benchmark 30-year T-bond closed at 5.55%, down from 5.57% on Monday.
AT&T; upped the size of its record-setting bond sale to $8 billion from the previously planned $7 billion amid signs that investors are eager to scoop up securities yielding more than Treasuries.
Market Roundup, C8
* INFLATION WORRIES: OPEC’s price increase is making investors, policymakers nervous. A1
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Taking a Hit
The biggest losers in Tuesday’s rout were many of the blue-chip shares that have led the market this year. All of these shares fell 3% or more.
*--*
Stock Tuesday close and change Amgen $75.81 -$3.25 BankAmerica 69.00 -3.50 Citigroup 61.13 -2.50 GE 106.56 -3.81 GM 85.56 -4.69 Merck 83.00 -3.38 Merrill Lynch 85.69 -4.25 Microsoft 166.56 -6.25 Texas Instruments 91.25 -9.50 Wal-Mart 90.50 -2.81
*--*
Source: Reuters
