Uneasy Market Slides; Dollar Trips on Euro
Nasdaq ran out of steam Tuesday after a three-day rally, but the broader market ended mixed.
In other trading, the dollar tumbled against the euro and the yen, as currency traders bet the U.S. economy is indeed slowing. Gold gained as the dollar fell.
On Wall Street, a late bout of profit-taking sent the Nasdaq composite down 65.39 points, or 1.7%, to 3,756.37, just above its lowest level of the session. It had traded as high as 3,884.
The Dow industrials slid 79.73 points, or 0.7%, to 10,735.57. The Standard & Poor’s index of 600 small-cap stocks lost 0.6%.
Losers had a slight edge over winners on Nasdaq, where volume rose to 1.6 billion shares from 1.45 billion on Monday.
“You’ve got a lot of nervous fish in the sea right now, so you’re going to have a lot of sudden swings,” said David Briggs, head of stock trading at Federated Investors in Pittsburgh. “Until it becomes clear that the [Federal Reserve] is done raising rates, the market’s going to be susceptible to high volatility.”
In recent days fresh data has pointed to a slowing U.S. economy. On Tuesday, electronics retailer Circuit City said its May appliance sales weakened substantially.
But San Francisco Fed President Robert Parry, in comments to reporters, said it’s “too early” for the Fed to declare victory in slowing the economy and restraining inflation.
Treasury bond yields, which had fallen to six-week lows in recent days, were mixed on Tuesday. The 2-year T-note yield edged up to 6.52% from 6.49% on Monday.
In currency trading, however, heavy dollar-selling suggested traders there believe a U.S. slowdown is in progress that will eventually reduce demand for dollars, weakening the currency.
The euro rose to 95.5 U.S. cents from 94.8 cents Monday, the highest since April 14. The yen strengthened to 105.69 per dollar, from 107.69 on Monday.
What’s bad for the dollar is good for gold: Near-term gold futures in New York rose $3.60 to $289 an ounce, highest in three months, as the weaker dollar made bullion cheaper for overseas buyers.
“This rally is serious because it’s gradual and it’s dollar-related,” said George Gero, senior vice president-investments at Prudential Securities in New York. “Nobody expected there to be so much interest in gold.”
A key report for all markets will be Friday’s report on wholesale price inflation for May. Any sign that inflation pressures have abated further could help stocks and bonds, analysts say.
Among Tuesday’s highlights:
* Bank stocks were a major weak spot in the market, after Merrill Lynch analyst Judah Kraushaar warned that banks could see lower investment banking revenue, and thus reduced earnings growth, in a slowing economy.
Bank of America fell $2.50 to $56.75, J.P. Morgan lost $3.75 to $133.38, First Union slid $2.13 to $34.19 and Chase Manhattan fell $2.38 to $77.
* Many retail shares also fell sharply, as Circuit City dived $12.50 to $39.63 in the wake of its report on May sales. Home Depot fell $2 to $50.38, Federated Department Stores lost $1.81 to $37.25 and May Department Stores slid $1.38 to $28.94.
* In the tech sector, Microsoft rose $2.75 to $69.63 and Apple gained $1.56 to $92.88, but many other major techs faded after early gains. Cisco Systems ended down $1.94 to $61.31, Sun Microsystems fell $4.31 to $83.88, Agilent dived $8 to $71 and Adobe Systems, a recent highflier, fell $13 to $115.69.
Internet-related shares also slid. Yahoo fell $2.25 to $135.06, EBay lost $3.63 to $71.81 and Priceline.com dropped $4.94 to $44.06.
* Biotech stocks bucked the downtrend in other tech shares, and major drug stocks also gained. Eli Lilly rose $1.69 to $74.13 and Schering-Plough added 88 cents to $45.25.
* Starbucks jumped $1.88 to $37.50. The coffee company will be added to the S&P; 500 today.
* Energy stocks rebounded after falling on Monday, as crude oil prices firmed. Exxon Mobil surged $3 to $82.31, El Paso Energy leaped $3.31 to $50.50 and Unocal gained $1.56 to $36.75.
* In the food sector, some shares gained on news that Bestfoods agreed to a takeover by Unilever. Hershey Foods rose $1.63 to $50.81, General Mills rose $1 to $39.75 and Quaker Oats gained 81 cents to $69.31.
Market Roundup, C10-11
