Stocks Lose Ground Again; Euro’s Value Hits New Low

Stocks ended mostly lower Thursday, bond yields were mixed and the euro currency now is eligible for shelf space at 99 Cents Only Stores.

Despite an earnings warning late Wednesday from Dell Computer, the technology sector held up fairly well Thursday, leaving the Nasdaq composite index with a loss of just 30.35 points, or 0.8%, for the day. The index closed at 4,039.56, after falling as low as 3,973.59.

The Dow industrials slipped 4.97 points to 11,028.02. But that finish belied another volatile session: The Dow was up as much as 130 points and down as much as 116.

In the broad market, losers topped winners by 16 to 15 on the New York Stock Exchange and by 23 to 18 on Nasdaq.

The Dow has fallen 6% from its Jan. 14 closing high of 11,722.98, and Nasdaq has sliced nearly 5% from its closing high of 4,235.40, set just last Friday.

The market failed to get much of a lift Thursday even from soothing words from one of its biggest bulls.

Goldman Sachs’ chief investment strategist, Abby Joseph Cohen, rejected suggestions that the U.S. market was overvalued. Returns on investment capital are high, labor productivity is high, and the U.S. has created 16 million jobs over the last five years, Cohen noted, speaking at the 30th annual meeting of the World Economic Forum in Davos, Switzerland.

Given the superior performance of the U.S. economy, she said, blue-chip stocks are at “fair value,” not overvalued.

Even so, Cohen said, U.S. equity returns this year “will be good but not great.” She predicted the Standard & Poor’s 500 index will rise 8% to 10% in 2000. So far this year the index is down 4.8%.

Stocks’ immediate problem, many analysts say, is the Federal Reserve: Policymakers meet Tuesday and are expected to raise the central bank’s key short-term interest rate, now 5.5%, to at least 5.75%.

Fears of another rate hike helped push shorter- and intermediate-term Treasury bond yields higher Thursday. The yield on the two-year T-note rose to 6.53% from 6.45% on Wednesday. The yield on the 10-year T-note rose to 6.7% from 6.67%.

But the yield on the 30-year T-bond fell to 6.52%, down from 6.57% on Wednesday.

That divergence in yields suggests that, although investors expect the Fed to raise rates, many also believe the Fed will be successful in slowing the economy--which may allow long-term yields to fall sooner than later.

Today the government will release estimates of fourth-quarter gross domestic product growth and the change in the employment cost index, a key inflation barometer.

In currency trading, meanwhile, the euro tumbled against the dollar and the yen Thursday, sinking below 99 cents for the first time.

The euro ended at 98.9 cents in New York, down from $1.001 on Wednesday. It was worth $1.17 at its launch in January 1999.

“The euro is the weak link” as investors see better opportunities in the U.S. and Japan, said Richard Kasmin, a currency strategist at Donaldson, Lufkin & Jenrette. U.S. growth continues with little inflation, and Japan’s stock market has been among the world’s best performers in the last year.

Among Thursday’s highlights:

* Dell fell $2.81 to $37.56 after its earnings warning. But Wall Street brokerages including Merrill Lynch and Chase Hambrecht & Quist stepped in to defend Dell, raising their recommendations on the stock.

Among other tech issues, Compaq fell 88 cents to $28, but Intel rose $1.63 to $98.13 and Gateway gained $1 to $60.

* Coca-Cola tumbled for a second session, losing $3.56 to $59.50. The company announced plans Wednesday to eliminate 6,000 jobs, about one-fifth of its work force. Rival PepsiCo eased 13 cents to $33.81.

* Wireless technology leader Qualcomm fell $6.13 to $120, continuing its descent after soaring in 1999. But Lucent Technologies added 75 cents to $56.59.

* Among Southland issues, Conexant Systems soared $13.25 to $87.56 on news it will be added to the S&P; 500 after the close of trading today. Epicor Software, which surged Wednesday after a money manager touted it on CNBC, fell 31 cents to $8.69.

* Energy stocks were broadly lower after Mexico hinted it could push for oil production increases. Exxon Mobil lost $2.50 to $81 and Chevron slid $3.44 to $84.31.

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Market Roundup, C7