Dow Sheds Early Gain; Dollar Sinks
Investors brushed off a government report that showed little evidence of rising inflation and drove stocks lower Wednesday in a late sell-off.
The dollar’s weakness against the Japanese yen also continued to undercut stocks and bonds.
The Dow Jones industrial average fell 108.91 points, or 1%, to 10,801.42. The index tumbled from an early gain of 103 points.
Broader stock indicators also closed lower. The Nasdaq composite slumped 1.9%. Losers outnumbered winners by 3 to 2 on the New York Stock Exchange.
The report of a modest increase in August consumer prices initially pushed bond yields lower and stocks higher. But the report was not enough to convince investors that the Federal Reserve will hold off on raising interest rates for the third time this year. The Fed meets in early October.
The report “wasn’t reflective of what is really going on” with rising housing and oil prices, said Randy Bateman, money manager at SunTrust Private Capital Group in Orlando, Fla.
The 30-year Treasury bond yield fell from 6.12% on Tuesday to 6.07% early Wednesday, but then rebounded to close at 6.10%.
“Investors believe we’ve lost the wind at our backs in terms of low inflation and low interest rates,” said Lynn Yturri, who runs the One Group Equity Income Fund for Banc One Investment Advisors.
The dollar also remains a worry as it sinks in value, threatening higher import prices.
The dollar ended in New York at 104.23 yen, a 3 1/2-year low and down from 105.79 on Tuesday.
“The yen is the big-picture currency right now,” said Lon Dolan, a trader at Royal Bank of Scotland. “The market is just wanting to take the dollar lower.”
For Wall Street, the usual continuing stream of pre-end-of-quarter earnings warnings also is weighing on sentiment.
Boston Scientific, a medical devices maker, saw its shares plunge $8.31 to $27 after it said third-quarter sales will be below expectations. Also, US Airways, which late Tuesday said it will lose money this quarter, slumped $2.19 to $25.44.
Still, corporate earnings overall are expected to be strong.
Some analysts said Wednesday’s late market slide partly reflected selling in advance of Friday’s quarterly “triple witching” day, when key options and futures on stocks and stock indexes expire.
Among Wednesday’s highlights:
* Tech stocks suffered another bout of profit-taking, led by software giant Oracle, which slid $2.75 to $42.69 after its quarterly earnings, reported late Tuesday, met but didn’t exceed expectations.
Other losers included Intel, down $2.81 to $83; Adobe Systems, down $10.25 to $95.31; Micron Technology, down $5.13 to $76.75; and America Online, down $2.13 to $88.88.
* Telecom equipment stocks fell as Motorola got a poor reception for its merger announcement with General Instrument. Ciena slid $2.31 to $37.50 and Tellabs lost $3.38 to $54.63.
* Biotech shares also were broadly lower, led by Genentech, down $7 to $155.50, and Amgen, down $3.94 to $82.06.
* On the plus side, some food stocks gained on reports that Heinz and Bestfoods are in merger talks--though Bestfoods denied it. Bestfoods surged $4.19 to $53.13 and Heinz added $1.44 to $44.63.
General Mills rose $1 to $83.56, PepsiCo gained $1 to $33.50 and Hershey Foods added 56 cents to $52.
* Among new issues, shares of NETsilicon (ticker symbol: NSIL), which makes chips and electronics equipment, surged $5.38 to $12.38 on its first trading day.
Also, Web site designer Luminant Worldwide (LUMT) priced 5.5 million shares at $18, above the $15-to-$17 range expected. Garden.com (GDEN) priced 4.1 million shares at $12. Both will begin trading today.
Market Roundup, C11
