MARKET SAVVY : Manufacturing Report Leaves Stocks Mixed
Stocks were mixed Tuesday as a report of continued growth in the manufacturing sector ignited fears of inflation and hurt blue-chip companies. Technology stocks, benefiting from a wave of new deals and products, moved higher.
The Dow Jones industrial average fell 84.85 points to close at 10,829.28. The Dow suffered its fourth straight loss during a volatile session in which the index rose as much as 67 points and tumbled as much as 132 from Monday’s close. Tuesday’s decline brought the Dow’s cumulative four-day loss to about 500 points.
But broader stock indicators were mixed. The tech-dominated Nasdaq composite index rose 26.66 points to 2,739.35, and the Standard & Poor’s 500 fell 3.61 points to 1,320.41. The Russell 2,000 index of smaller companies edged 0.47 point higher to 427.83.
Stocks fell after the National Assn. of Purchasing Management inadvertently released its monthly survey on August manufacturing activity a day early.
Most troubling to stocks was a segment of the report that tracks prices paid by industry for raw materials and supplies. That figure rose to the highest level since June 1995 and suggests inflation may be building as the economy continues to grow.
“This is going to be the way we spend the rest of the summer and the fall--getting good economic data and wondering what the Fed is going to do about it,” said Joseph Battipaglia, chief investment officer at Gruntal & Co.
Many cyclical stocks, whose performance is tied to the fortunes of the broader economy, fell. Sears Roebuck dropped $2 to $37.50 and Caterpillar lost $2.88 to $56.63.
“This is a market searching for leadership,” said Ned Riley, chief investment officer at BankBoston. “Most people are waiting for the payrolls [job-creation] report to formulate opinions about what the Fed might do next.” The Federal Reserve’s rate-setting policy committee meets Oct. 5.
Higher rates threaten stocks by cutting into corporate profits and increasing the value of alternative investments such as bonds.
Treasury yields were largely unchanged Tuesday.
Most oil stocks rose, including Dow components Chevron, up $1 to $92.31, and Exxon, up $1.06 to $78.88. Crude oil futures, which jumped sharply Monday after Venezuela, Mexico and Saudi Arabia decided against raising production, rose again.
Tech stocks bucked the market’s weakness as several companies announced new deals or new products. Hewlett-Packard rose $2.56 to $105.38 after the company unveiled several new printers and paper.
Sun Microsystems rose $3.88 to $79.50 after the company bought Star Division, a small maker of office productivity software. Analysts viewed the acquisition as an assault on Microsoft’s dominance of the office software market. Microsoft eased 31 cents to $92.56.
Declining issues outnumbered advancers by a 5-4 ratio on the New York Stock Exchange.
Volume rose dramatically from recent days. Some analysts attributed the pickup to end-of-the-month settling of portfolios and computer-driven trading among large shareholders.
Among the highlights:
* Fatbrain.com catapulted $9.06 to $24.06 after the company said it will allow authors to publish and sell their work on its Internet site, with Fatbrain.com keeping a portion of the profits.
* Cadence Design Systems rose $1.50 to $13.63 as BancBoston Robertson Stephens upgraded its rating on the stock after the company unveiled its new printed circuit board systems unit.
* Focal climbed $1.63 to $5.75 as the Food and Drug Administration said it will allow the firm to initiate a clinical trial for its FocalSeal-S surgical sealant product. The product is designed to prevent fluid leaks following neurosurgical procedures.
Overseas, Japan’s Nikkei stock average fell 2.7%, and European markets also declined.
Market Roundup, C9
