Sustained Rally Talk Dies Amid Weak Markets
Technology’s big Tuesday rally couldn’t hang: The Nasdaq composite index stumbled Wednesday, ending with a 58.57-point, 1.7% loss to 3,400.91, as sellers pounded some key tech names that had rocketed Tuesday.
Meanwhile, Treasury bond yields fell across the board, suggesting the growing belief that the economy is slowing.
In commodities trading, crude oil fell more than 4% on talk that the Organization of Petroleum Exporting Countries could boost output as early as next week.
On Wall Street, Nasdaq’s failure to follow through on Tuesday’s record 7.9% surge disappointed analysts who had hoped Tuesday was the start of a sustained advance.
“I think we’re going to see these periodic rallies, but I don’t think they’ll be sustainable because of the nervousness that’s lingering over” more credit-tightening by the Federal Reserve, said Ned Riley, chief investment strategist at State Street Global Advisors.
The broad market ended mixed. The Dow industrials eased 4.80 points to 10,522.33, though winners topped losers by 18 to 13 on the New York Stock Exchange.
On Nasdaq, losers had a small edge over winners. Volume was 1.54 billion shares, up slightly from Tuesday’s total--and a further disappointment to analysts, who saw the rise in volume on an overall down day as another bad sign for the tech sector.
Qualcomm led tech stocks lower, sinking $10 to $66.38 after Credit Suisse First Boston analyst Marc Cabi said talk that China Unicom won’t use Qualcomm’s cell-phone technology could have “negative implications” for the firm. But early today, China Daily said those plans are still on track.
Qualcomm had soared $10.31 on Tuesday.
Other tech losers Wednesday included IBM, down $3.63 to $107.31; Advanced Micro Devices, down $4.25 to $81.75; Hewlett-Packard, down $4.31 to $120.19; and Gateway, down $3.13 to $49.50.
The broad market’s weakness was perhaps more surprising in that Wall Street appeared to get fresh evidence that the economy is slowing--which should give investors confidence that the Fed won’t raise interest rates much more.
Several economic reports Wednesday pointed to slowing activity. Bonds responded favorably, with the 10-year Treasury note yield sliding to a one-month low of 6.29% from 6.38% on Tuesday.
The 30-year T-bond yield dived to 6.01% from 6.09%.
But some stock investors may have other worries if business activity is slowing.
“I’m not so optimistic that the Fed can engineer a slowdown without causing a recession,” said Eric Barden, who manages the Texas Capital Value & Growth fund.
Among Wednesday’s highlights:
* Internet-related shares were weak across the board. Yahoo fell $3.94 to $113.06, Inktomi lost $6.38 to $111.63 and Amazon.com fell $3.44 to $48.31.
* A relative few shares managed to continue climbing. They included Unisys, up $1.75 to $27.13; Micron Technology, up $1.19 to $69.94; Wireless Facilities, up $8.69 to $47.19; and Network Solutions, up $1.81 to $147.81.
* Energy stocks gained even though Hossein Kazempour Ardebili, Iran’s OPEC governor, said that oil prices could exceed OPEC’s target range before the group’s June 21 meeting, causing member nations to raise output by a pre-agreed 500,000 barrels a day.
That sent July oil futures in New York down $1.34 to $29.01 a barrel.
But in the energy-stock sector, BP Amoco rose $1 to $54.56, USX-Marathon gained $1.44 to $27.19 and Anadarko Petroleum jumped $2.81 to $53.25.
* Bank and brokerage stocks got a lift as bond yields fell. Bank of America rose $1 to $55.44. Merrill Lynch jumped $4 to $98.63.
* Cable TV firm Comcast surged $3.44 to $37.56 after a Morgan Stanley analyst raised his rating to “strong buy.”
* Some retail stocks attracted interest in advance of May sales reports. Wal-Mart rose $4.25 to $57.63 and Federated Department Stores added $1.56 to $38.50.
* Insurer Conseco surged $1.50 to $6.44 on takeover rumors centered on financier Irwin Jacobs.
* Among Southland issues, medical technology firm Syncor surged $2.88 to a record $49.25, though there was no apparent news.
In currency trading the euro’s rally continued, as it closed at 93.7 U.S. cents in New York, up from 93.2 cents on Tuesday.
Market Roundup, C9-10
