Stock Indexes Sent Reeling by Rekindled Fears of Rate Hikes
Stocks tumbled Wednesday after the latest sign of economic growth brought interest-rate worries to the forefront on the eve of two anxiously awaited government reports.
Blue chips that have failed to live up to the market’s robust profit expectations led the drop. The Dow Jones industrial average sank 179.32 points, or 1.6%, to 10,945.50.
Other indexes were also lower, with the Nasdaq composite losing 81.14 points, or 2.2%, to 3,630.09; the Standard & Poor’s 500 sliding 1.1%; and the Russell 2,000 easing 1%.
Losers had a modest edge over winners on Nasdaq and on the Big Board. Volume slowed.
A day after the Dow and Nasdaq each rose more than 200 points, many buyers retreated to the sidelines. Selling gathered momentum in the final hour as investors unloaded stocks in advance of a pair of crucial first-quarter economic reports due out today--gross domestic product growth, and the employment cost index.
The market was rattled Wednesday by a Commerce Department report that orders to U.S. factories for big-ticket items rose during March, the first increase this year.
The durable goods report revived fears that the Federal Reserve will continue raising interest rates in an effort to force a slowdown of the economy. The Fed has raised rates five times since last spring.
“If the Fed is looking for signs of moderation, they won’t find it” in the durable goods report, said David Orr, chief economist at First Union Securities.
A larger-than-expected increase in the employment cost index today could further hurt markets by boosting wage-inflation fears.
Nervousness over the employment-cost figure was evident in the bond market, where Treasury bond yields continued to rise. The 30-year T-bond ended at 5.94%, up from 5.93% Tuesday and the highest since late March.
Investors continued punishing the blue-chip companies that failed to impress Wall Street with their first-quarter profit reports. Procter & Gamble fell $3.50 to $60.75, 3M lost $4.88 to $88.94 and DuPont dropped $2.50 to $49.13. All three are Dow-index stocks.
In the tech sector, many big-name stocks continued to churn, with modest losses. Intel fell $4.19 to $120.81, IBM lost $2 to $110.50, Oracle slid $3.38 to $72.19 and Microsoft eased $1.38 to $68.
Among the equity highlights:
* Transaction Systems Architects plunged $11.69 to $13.31 after the banking-software company reported quarterly net income that was less than a third of analysts’ estimates.
Other tech stocks falling on weak or moderate earnings reports included LSI Logic, down $2.25 to $54.56, and McKesson HBOC, off $1.94 to $17.
EBay sagged $4.31 to $149.25 even though the online auctioneer’s first-quarter operating results exceeded analyst expectations.
* Nortel Networks jumped $4 to $116.50 after the phone-equipment maker topped analysts’ forecasts for the first quarter and said sales rose 48% on higher demand for optical-networking products.
Other stocks getting a boost from robust earnings reports included Viacom, up $2.69 to $54.63; Varian Semiconductor Equipment Associates, up $7.56 to $64.06; Scientific-Atlanta, up $7.63 to $65.13; Oxford Health Plans, up $3.44 to $19.31; Chevron, up $1.50 to $86.31; BMC Software, up $3.69 to $44.50; and CheckFree Holdings, up $7.06 to $39.56.
* Among Southland stocks, Amgen rose $2.94 to $57.25 after the biotech giant won a procedural ruling in a legal battle to block Transkaryotic Therapies from selling a version of its top-selling drug, the anemia treatment Epogen. Transkaryotic fell $4.13 to $28.
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Market Roundup, C10-11
