Nasdaq Leads Declines as Fed Meeting Nears
Internet stocks led a second day of losses on the Nasdaq market on Friday, while the broad market also weakened ahead of the meeting of Federal Reserve policymakers next week.
It didn’t help stocks that Treasury bond yields jumped on Friday, closing higher for the week after declining the previous four weeks.
The Nasdaq composite sank 91.50 points, or 2.3%, to 3,845.34, though it managed to close above its low for the day of 3,830.
Most major indexes fell, as losers topped winners by 4 to 3 on the New York Stock Exchange and by 21 to 17 on Nasdaq.
The Dow industrials, however, edged up 28.63 points to 10,404.75, helped by rebounds in some “old economy” stocks.
Trading was light Friday as many investors stayed on the sidelines ahead of the Fed’s regular meeting Tuesday and Wednesday.
While there have been signs that the economy has been slowing in response to the Fed’s six interest rate hikes in the last year, traders are hesitant to make investment commitments when the Fed may move to tighten credit further to keep inflation in check.
“The market hates uncertainty and we have a big uncertainty in front of us,” said Alfred E. Goldman, director of market analysis at brokerage A.G. Edwards & Sons in St. Louis. “When people are confused on Wall Street, they often keep their hands in their pockets.”
On Nasdaq the last two days, however, some investors couldn’t resist cashing in profits from the tech-stock rebound of recent weeks.
On Wednesday the Nasdaq index closed above 4,000 for the first time since mid-April. But the selling on Thursday and Friday left Nasdaq down 0.4% for the week. The Dow fell 0.4% for the week as well.
The bond market had a rougher week. The 10-year Treasury note yield ended Friday at 6.19%, up from 6.11% on Thursday and 5.98% a week ago.
“For the bond market, the question is what is the Fed going to do,” said Arthur Micheletti, who is holding off bond purchases for the $300 million at Bailard, Biehl & Kaiser Inc. in San Mateo, Calif. “That perception has changed somewhat this week with oil prices rising,” and yields have jumped as a result, he said.
Crude oil prices edged up 6 cents to $32.25 in New York futures trading on Friday. Prices were virtually unchanged from a week ago, even though major oil producers pledged this week to boost production.
Oil’s continuing rally could lead the Fed to conclude that higher energy prices pose an ongoing inflation threat, analysts say. That could mean the central bank will lean toward raising its key short-term interest rate, now 6.5%, once again.
For the stock market, the focus next week will be on the Fed, of course, but also on expectations for second-quarter earnings. The quarter ends next Friday.
Among Friday’s highlights:
* In the Internet sector, Amazon.com led the sell-off on new questions about its financial health. Amazon lost $8.13 to $33.88.
Other falling Net stocks included About.com, down $5.13 to $29.81; VerticalNet, down $3.88 to $38.69; InfoSpace, down $4 to $52; and CMGI, down $3.50 to $47.63.
* Elsewhere in tech, Apple Computer fell $2.06 to $51.69, Microsoft lost $2.19 to $77.69, Sun Microsystems slid $5.50 to $86.56 and Gateway sank $3.06 to $58.25.
Chip stocks, hot in recent weeks, also pulled back. Broadcom fell $3.44 to $165.06, Advanced Micro Devices slid $3.50 to $87.75 and Texas Instruments was off $5.88 to $75.75.
But Intel inched up 31 cents to $134.38 and Rambus jumped $17.56 to $114.69.
* Telecom stocks were mostly lower, led by AT&T;, down $1.69 to $34.38; Vodafone AirTouch, down $4.19 to $43.94; and Nokia, down $3.25 to $53.25.
* Some biotech shares rallied, despite selling elsewhere on Nasdaq. Gilead Sciences gained $5.88 to $69.44, Affymetrix rose $2.06 to $175.69 and Celera Genomics gained $7 to $127.
* Among “old-economy” shares, food stocks gained on news of another takeover in the sector. Heinz rose $1.38 to $43.19, Quaker Oats rose $1 to $73.19 and Kellogg was up $1.75 to $28.56.
Market Roundup, C4
