Profit-Taking Ends Nasdaq’s Record Streak

Nasdaq’s chief stock index apparently does go in both directions.

Profit-taking on Tuesday ended the Nasdaq composite’s hot streak of record closes at seven, as the index slid 18.93 points, or 0.6%, to 3,125.04.

The decline occurred as trading volume on the Nasdaq market hit a record 1.457 billion shares. Volume was swelled by trading in the initial public offering of Charter Communications, which rose $3.75 to $22.75 as 116 million shares changed hands; and by continued heavy activity in Microsoft, which fell $1.06 to $88.88 on volume of nearly 55 million shares.

The previous Nasdaq trading record was set Oct. 29, when 1.438 billion shares traded.

The Dow Jones industrials fell more sharply than Nasdaq, losing 101.53 points, or 1%, to 10,617.32.

Stocks slipped as bond yields edged up for the first time in six sessions. Bonds were under pressure as demand at the Treasury’s auction of $15 billion in five-year notes was described as tepid by many traders.

The new notes carry a yield of 5.89%.

The yield on the Treasury’s bellwether 30-year bond closed at 6.07%, up from 6.06% on Monday.

Some bond traders may have been squaring positions ahead of today’s report on October wholesale inflation. Wholesale prices are estimated to have risen just 0.1% overall last month, after surging 1.1% in September, when some special factors drove prices.

The report will be another element for Federal Reserve policymakers to consider at their meeting next Tuesday, when they mull whether to raise short-term interest rates again--or leave things alone.

Bond yields have fallen in recent sessions as more investors have taken the view that signs of a slowing economy--and still muted wage pressures--will keep the central bank from raising rates.

But Jeffrey Palma, economist at Warburg Dillon Read in Stamford, Conn., noted on Bloomberg News: “Right now [bonds are] pricing in a lot of good news, and if the Fed does go ahead and raise rates you’d get a surprise” and bond yields could resurge, he said.

In the stock market losers topped winners by 17 to 13 on the New York Stock Exchange and by 21 to 19 on Nasdaq.

A bright spot: smaller stocks. The Russell 2,000 index of smaller issues edged up 0.3%. It has risen 9.1% from its mid-October low, just slightly behind the blue-chip Standard & Poor’s 500 index’s 9.4% advance. The Nasdaq composite, however, still is king: It’s up 16.2% from its mid-October low.

Among Tuesday’s highlights:

* Microsoft fell as low as $86.44 as some investors continued to flee in the wake of Friday’s federal court ruling that the company exercises monopoly power.

The software giant’s rivals, after surging on Monday, were mostly lower. Red Hat fell $6.50 to $97.50, Apple Computer slid $6.75 to $89.63 and Oracle fell $1 to $58.44.

* Financial stocks took a breather. J.P. Morgan lost $2 to $134.75, Bank of America fell $2.06 to $63.94 and Merrill Lynch sank $1.88 to $77.06.

* Energy stocks rallied again. The International Energy Agency forecast strong oil demand this winter in industrialized nations, and Kuwait said major producers had agreed in principle to extend output cuts beyond March. Near-term crude oil futures jumped 76 cents to $24.03 a barrel.

Exxon rose $1.50 to $75.31 and Schlumberger surged $2.13 to $62.31.

* Some Asian shares rallied. Sony hit a record $170, up $5.25; Korea Telecom surged $5.06 to $42.88; and China Telecom leaped $5 to $78.25.

Market Roundup, C11