Stocks Fall in Light Trading as Fed-Fixation Takes Hold
Doesn’t anyone want to play this game anymore?
Stocks ended broadly lower for a second day Tuesday as volume remained thin, indicating many investors and traders have simply stepped away--most likely waiting for the Federal Reserve meeting next week.
The Nasdaq composite index, which has been churning mostly between 3,500 and 3,900 since mid-April, ended down 84.37 points, or 2.3%, at 3,585.01, though it pulled up from a low of 3,540.
The Dow industrials eased 66.88 points, or 0.6%, to 10,536.75.
Losers topped winners by 27 to 14 on Nasdaq and by 16 to 13 on the New York Stock Exchange, but volume of 1.45 billion shares on Nasdaq was just a shadow of the market’s activity during the wild days of March and April.
“It’s the onset of the Fed watch,” said Ronald J. Hill, strategist at Brown Bros. Harriman & Co. “There’s not a lot going on, but the tone is very heavy.”
Many stocks, analysts say, are falling simply from a severe lack of interest--not because of any major selling pressure.
It doesn’t help, though, that more investors may be weighing still-high price-to-earnings ratios of many tech stocks against the threat of a sustained campaign of interest-rate increases by the Fed. Higher interest rates are competition for stocks and also may eventually slow the economy and corporate earnings growth.
Those worries are helping to chip away at such tech names as fiber-optics firm JDS Uniphase. It fell $2.56 to $85.81 on Tuesday. The stock fell as low as $79.63 (on a closing basis) in the mid-April tech plunge, then rebounded to $104.25 before sinking again.
At $85.81, the price is down from its record high of $153.38, but still is 148 times the 58 cents a share the company is expected to earn in the fiscal year ending in mid-2001.
Tech stocks didn’t draw any strength from a slight easing of rates in the Treasury bond market. Yields have been climbing for the past week on concerns about what the Fed will do. On Tuesday, the yield on the 10-year T-note slipped to 6.52% from 6.57% Monday.
The Treasury sold $12 billion of new five-year notes at a yield of 6.79%, and demand was better than expected.
Among Tuesday’s highlights:
* Major tech names under continued pressure included Apple, down $4.69 to $105.44, the lowest closing price since Feb. 3; Microsoft, down $2 to $67.81; Sun Microsystems, down $3.25 to $82.13; and Dell, down $1.13 to $46.81.
Many Internet and biotech names also slumped.
But 3Com jumped $4.56 to $48.25 after saying it would complete the spinoff of its Palm unit several months ahead of schedule. Palm skidded $3.13 to $29.13.
* Some investors again turned back to consumer-products stocks, typically a “defensive” move in a nervous market.
Coca-Cola jumped $2 to $50.50 after Goldman, Sachs & Co. analyst Marc Cohen raised the stock to “recommend list” from “market perform” and said the shares could reach $60 in a year.
Among other consumer names, Anheuser-Busch rose $1.94 to $74.31, Gillette gained $1.88 to $37.19 and Clorox surged $1.63 to $38.94.
* Some insurance issues also attracted buyers, including John Hancock, up 31 cents to $20.75, and Unitrin, up $1 to $33.81.
*
Market Roundup, C9-C10
