Nasdaq in ‘Correction’ as Tech Shares Slump Again
Is it over--or just getting revved up?
Stocks tumbled worldwide Thursday as investors continued to flee many of the tech stock winners of the first quarter.
The Nasdaq composite index plunged 186.78 points, or 4%, to 4,457.89 and narrowly avoided its worst point loss ever as buyers finally jumped back in during the final half-hour of trading.
Thursday’s slide, Nasdaq’s fourth straight loss, left the composite index down 10.2% for the week and down 11.7% from its record-high close March 10, constituting what’s normally called a “correction,” or a drop of 10% or more from peak levels.
Meanwhile, some of the money leaving “new-economy” stocks sought refuge in “old-economy” shares of insurance, chemical and energy companies and in Treasury bonds.
The Dow Jones industrial average lost 38.47 points, ending the day at 10,980.25. And while losers swamped winners by 31 to 12 on Nasdaq, more stocks rose than fell on the New York Stock Exchange.
The tech sell-off that began Tuesday has become a global affair. Falling tech and telecom shares pulled the German market down 2.8% on Thursday, the Hong Kong market down 3.5% and the Toronto market down 3.2%.
Nasdaq’s decline began to look like a meltdown late in the day, as the index fell 289 points, or 6.2%, before rebounding.
The Nasdaq’s worst full-day point loss was a 229.46-point decline Jan. 4.
Many analysts say the pullback in tech stocks is hardly surprising, given the run-up in the shares in recent months. With the first quarter set to close today, many money managers have been selling such names as Intel, Oracle and Cisco Systems to save their gains and post handsome performance numbers for the quarter.
Even with its sharp decline, Nasdaq still is up 9.6% year-to-date, while the Dow is down 4.5%.
“You had a lot of profits being accumulated by the traders in technology [shares] and not anywhere else,” said Alfred Kugel, senior investment strategist at Stein Roe & Farnham. “When the traders get a little spooked, they have to sell what they have the profits in.”
The spooking this week came from two well-known market gurus: market strategist Abby J. Cohen of Goldman Sachs and emerging-markets expert Mark Mobius at Templeton mutual funds.
Cohen on Tuesday suggested that investors pare back stock holdings slightly. Mobius on Wednesday warned of a global crash in Internet stocks.
“The psychological nerve of the market is slowly beginning to unravel a bit,” said Brian G. Belski, strategist at George K. Baum & Co. in Kansas City, Mo.
“Technology specialists are starting to use the ‘v’ word: value,” said Zane Brown, vice president at Lord, Abbett & Co. “People are questioning valuations and are less willing to buy technology stocks at any price.”
In addition, new figures Thursday showed the U.S. economy to still be red-hot, keeping intact fears of additional hikes in interest rates by the Federal Reserve.
But in the Treasury bond market Thursday, yields fell despite the latest economic data, as some stock sellers snapped up bonds. The yield on the 30-year T-bond slid to 5.87% from 5.97% on Wednesday, and now is the lowest since August.
Is Nasdaq headed for a far more serious pullback? Nasdaq volume of 1.9 billion shares Thursday, though up from Wednesday, remained below record levels, suggesting that the profit-taking had not turned into panic selling, especially among individual investors.
Some market pros already are viewing the drop as an appealing entry point to get back in. “We’re looking at this as a buying opportunity,” said Rich Barnett, portfolio manager at City National Investments in Beverly Hills, which oversees $4 billion.
Among Thursday’s highlights:
* Major tech stocks taking their lumps included Cisco, down $2.44 to $73.63; Intel, off $4.88 to $127; Yahoo, down $7.56 to $169.50; and Apple, down $10.19 to $125.75
The telecom sector also was hit hard, as Nortel Networks dropped $10.63 to $124 and Next Level slid $17.56 to $120.38.
* Many biotech shares also fell again. The sector has been among the biggest losers on Nasdaq in recent weeks. Abgenix slid $14.56 to $144.88, Gilead Sciences sank $7.63 to $59 and Cephalon lost $5.63 to $32.63.
* Leading the gainers among old-economy stocks were Coca-Cola, up $1.69 to $48.56; United Technologies, up $3.75 to $61.38; and Dow Chemical, up $7.13 to $116.50.
Also, Bed Bath & Beyond shot up $10.13 to $43.63 after the retailer said earnings in its fiscal fourth quarter rose 42%.
* Oil stocks also were mostly higher, rallying for a second day in response to plans by major oil exporters to boost production. Chevron jumped $3.69 to $92.19, Conoco gained $1.94 to $26.50 and Valero Energy rose $1.31 to $31.
New York crude futures edged up 25 cents to $26.70 a barrel.
Market Roundup, C7
