Investors Seek Safety Amid Tech Jitters
The seesaw market tilted again in favor of “defensive” stocks Thursday, as technology issues closed broadly lower while food and beverage stocks gained.
In the bond market, long-term Treasury yields tumbled, leaving the 30-year bond at a four-month low, amid growing optimism that the Federal Reserve is finished raising interest rates.
But that sentiment didn’t do much for stocks. The Nasdaq composite index fell 93.51 points, or 2.4%, to 3,759.99, and most other broad indexes also lost ground. The Standard & Poor’s 500 fell 0.9%.
The Dow industrials, however, inched up 2.93 points to 10,908.76.
Losers topped winners by 24 to 16 on Nasdaq in fairly light trading. On the New York Stock Exchange, losers had a modest edge over winners.
Traders say the stock market can’t get terribly excited by the idea that interest rates have peaked because of concerns that corporate profits might slow.
“There’s a lot of nervousness in the technology sector. The valuations are so high in that area that they can brook no disappointments,” said Michael Metz, a managing director and portfolio manager at CIBC World Markets in New York.
“It’s time to lower expectations and invest in those companies that have a chance of meeting or beating earnings expectations,” argued Alan Skrainka, chief market strategist with brokerage Edward D. Jones & Co. in St. Louis.
That’s why buyers pushed up such names as Coca-Cola, up $1.19 to $61 on Thursday, and PepsiCo, up $1.06 to $45.06, he said.
In the bond market, the Treasury’s sale of $5 billion in 30-year bonds drew the strongest demand since November 1987, said Lou Crandall, an economist at Wrightson Associates.
The average yield on the bonds was 5.70%. That pulled long-term yields in general lower.
Investors bought the new 30-year bonds “fearing the bond might soon be eliminated” as the government uses its surplus to pay down the national debt, said Liz Miller, money manager at Trevor Stewart Burton & Jacobsen Inc.
In commodity trading, near-term oil futures continued to zoom amid falling supplies. Oil jumped 99 cents to $31.34 a barrel, the highest since July 19.
Among Thursday’s highlights:
* Many energy stocks gained with crude prices. Exxon Mobil added 44 cents to $81, Chevron surged $1.28 to $83.88 and Amerada Hess rose $1.19 to $64.50.
* Food stocks attracted investors looking for safety. Quaker Oats jumped $1.31 to $70.31, Kellogg gained 75 cents to $26.69 and Heinz rose 63 cents to $40.56.
* In the tech sector, semiconductor equipment maker Applied Materials fell $2.88 to $69.25 despite third-quarter earnings that beat Wall Street’s expectations.
Other losers included Cisco Systems, down $4.44 to $63.38; Broadcom, down $9.44 to $225.19; and Adobe Systems, down $3.50 to $112.81.
In the telecom sector, WorldCom dropped $1.56 to a two-year low of $33.38.
* Among Southland issues, Dense-Pac slid $1.31 to $5.31. The maker of high-density memory systems said a shortage of direct random access memory computer chips will hurt fiscal second-quarter results.
* Spanish-language broadcaster Univision Communications slid $9 to $91 after diving Wednesday when it said advance ad sales for fall were weaker than expected.
* Retailers were lower amid worries about consumer spending. Wal-Mart fell $2.63 to $51 and Gap, which warned again of weaker earnings, slid $4.50 to $27.
* Eli Lilly added 25 cents to $77.13 after plunging Wednesday, when a court decision opened the way for generic competition for Lilly’s Prozac drug by 2001.
Market Roundup: C7-8
