Earnings Woes Depress Dow; Nasdaq Eases
Any news seems to be bad news for the “old economy” these days.
Blue-chip stocks closed broadly lower Monday as earnings worries slammed the drug and electric-utility sectors and as major energy stocks fell despite surging oil prices.
The Nasdaq composite index, meanwhile, made a run at 5,000 but pulled back to close slightly lower.
The Dow Jones industrial average slumped 196.70 points, or 1.9%, to 10,170.50, taking back most of Friday’s 202-point rally.
Nasdaq, which had rocketed 160 points to a record close on Friday, eased 9.94 points to 4,904.85 after rising as high as 4,980 amid another rally in telecom and biotech shares.
Friday’s broad market rally had been sparked by a weaker-than-expected February employment report, which raised hopes that the Federal Reserve might back off from its concerted effort to tighten credit.
But on Monday, Fed Chairman Alan Greenspan’s latest speech on the economy produced more of the same: another warning that the central bank will continue to raise short-term interest rates.
Bond yields edged higher Monday after Greenspan’s speech, though the reaction overall was muted. The 30-year Treasury bond ended at 6.14%, up from 6.13% on Friday.
In the stock market, however, bank and other financial shares were broadly lower, as if the bond market had had a much worse reaction.
In general, investors still appear to be looking for any excuse to sell so-called old economy shares.
Electric utilities tumbled after Edison International, parent of Southern California Edison, warned that weaker power prices in Britain will hurt earnings this year.
Edison plummeted $7.69 to $17.94, and other utility shares tumbled with it. American Electric Power lost $1.13 to $26.19, Texas Utilities slid $1.63 to $28 and Public Service Enterprise dropped $1.88 to $27.06.
Another jump in crude oil prices--with April crude futures in New York rising 67 cents to $32.18, highest since 1990--failed to help major energy stocks. Exxon Mobil fell $2.75 to $72.94 and Texaco was off 63 cents at $46.63.
Losers topped winners by 19 to 11 on the New York Stock Exchange.
Among “new economy” stocks, meanwhile, almost all news seems to be good news. Strength in smaller tech-oriented stocks pulled the Russell 2,000 small-stock index up 0.6% to a record 601.64--its first close above 600.
NeoRx, a biotechnology company working on ways to improve radiation treatment of cancer, more than doubled after a medical journal said one dose of the company’s targeted radiation therapy cured cancer in certain mice. Analysts cautioned that the development might mean nothing for human cancer treatment. Still, the shares jumped $32.94 to $54.75 and pulled many other biotech shares higher.
Among Monday’s highlights:
* While biotech surged, Bristol-Myers led drug stocks lower after brokerage Salomon Smith Barney cut its rating on the stock to “outperform” from “buy,” citing concerns about future sales of two key drugs, Orzel and Glucophage.
Salomon said regulatory approval of the cancer drug Orzel may be delayed. It’s also unclear how long Bristol will be able to maintain patent protection for its Glucophage diabetes treatment, Salomon said.
Bristol Myers tumbled $5.06 to $46.44. Also falling were Johnson & Johnson, down $3 to $70.50; Merck, down $1 to $56.50; and Warner Lambert, down $1.38 to $84.25.
* Computer chip stocks soared, led by Advanced Micro Devices, up $6.50 to $48, after AMD said it’s shipping processors that run at 1 gigahertz, beating archrival Intel Corp. to the milestone.
Intel slid $1.88 to $117.38. But among other chip names, it was off to the races again. Rambus rocketed $42.06 to $328.50, PMC-Sierra jumped $29.38 to $230.38 and Virata gained $53.88 to $198.63.
* Internet Capital Group jumped $23.19 to $142.25 after analyst Eric Upin at Robertson Stephens raised his rating on the Internet holding company to “strong buy” from “buy.” He expects it to reach $250 within a year and a half.
* Not everything was rosy in tech land, however. IBM fell $4.94 to $103.06 and Microsoft slumped $5.50 to $90.63. Recent weakness in those shares suggests some investors are selling them to buy smaller tech names.
* Wal-Mart headed lower again after rebounding last week. Shares fell $2.13 to $50.50, and many other retail names also slid.
* Market Roundup, C12
