Bank, Internet Issues Lead Decline as Stocks Falter
Stocks tumbled Monday, with Internet and financial stocks leading the decline, as foreign worries, interest rate jitters and year 2000 computer-bug fears soured investors.
Trading volume was subdued, but for many investors that didn’t take the sting out of the price declines, which saw the Dow Jones industrials slide 174.61 points, or 1.6%, to close at 10,654.67.
The Nasdaq composite fell 2.6%, closing near its lows for the day.
Losers topped winners by 2 to 1 on the New York Stock Exchange and by nearly that ratio on Nasdaq.
Precisely because relatively few shares changed hands, prices turned more volatile. “When this market finally chose a direction, it was bound to be pretty extreme,” said Arthur Hogan, chief market analyst at Jefferies & Co.
Bank stocks were the first to fall. Citing concern about the year 2000 computer bug, Credit Suisse First Boston on Monday issued “sell” recommendations on several major banks, including Citigroup, which dropped $2.69 to close at $65.13.
Internet stocks, meanwhile, led Nasdaq’s decline.
“People are finally getting bearish on the ‘dot-com’ stocks,” Hogan said. Prudential Securities analyst Ralph Acampora issued an in-house report that suggested many Web-related stocks are at the top of their price ranges.
Major tech stocks also fell, with IBM down $6.63 to close at $223.75. Tom Galvin, chief investment officer at Donaldson, Lufkin & Jenrette on Monday shifted to an “underweight” position from “overweight” in computer-related stocks.
Galvin attributed the change in position to “tougher second-half earnings comparisons” and concern about the possibility of an interest rate increase by the Federal Reserve in the months ahead.
Traders are now looking ahead to government reports on initial jobless claims, gross domestic product, personal income and spending, all scheduled for release this week. Signs that the U.S. economy continues to grow at a brisk pace could fuel new worries about interest rates and inflation.
Yet bond yields were little changed Monday. The 30-year Treasury bond ended at 5.76%, same as Friday. Bonds may have been helped by a fresh plunge in commodity prices, which would be viewed as anti-inflationary.
Traders said the stock market’s mood also was influenced by a sharp drop in most Latin American stock markets on worries about Argentina’s economic situation. The Argentine market slumped 2.7%.
Wall Street’s action Monday continued the shift that has been ongoing for the last two months: The hardest-hit stocks were growth issues selling for high price-to-earnings ratios, while so-called value stocks--including many heavy-industry names--performed relatively well.
Among Monday’s highlights:
* Internet stocks down sharply included Amazon.com, off $11.06 to $117.50; CMGI, down $20.69 to $211.06; @Home, off $14.56 to $115.44; America Online, down $6.94 to $119.50; and Inktomi, down $10.69 to $103.31.
* Among major techs, Apple fell $2 to $41.94, and Cisco Systems sank $3.88 to $109.38.
* Airline stocks fell after BT Alex. Brown downgraded several carriers. Analyst Susan Donofrio said weak revenue trends and more expensive fuel should hamper results in the second half of 1999.
UAL, the parent of United Air Lines, fell $2.25 to $72.13, and AMR, which owns American Airlines, slid $2.19 to $64.19.
* Among major consumer growth stocks, American Express slid $3.44 to $116.81, Procter & Gamble dropped $3.31 to $93.94, Clorox gave up $1.75 to $105.88 and Warner-Lambert fell $3 to $63.88.
* Industrial stocks bucking the market trend included Georgia-Pacific, up $3.06 to $96.38; Illinois Tool Works, up 69 cents to $75.31; AK Steel, up $2.06 to $24.44; and Dow Chemical, up $2.31 to $128.50.
* Many utilities also fared well, including Duke Energy, up $1.25 to $59.38; Texas Utilities, up 88 cents to $44.94; and Reliant Energy, up 81 cents to $31.69. Utilities also are considered value stocks.
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Market Roundup, C13
