Markets Hit by Sell-Off on Tech Warning
Stocks closed mostly lower Thursday, ending the market’s brief respite from a monthlong sell-off. Investors, unnerved by yet another earnings warning from a high-tech firm, once again unloaded any stock perceived too risky.
“Old-economy” companies appeared to fare better as investors looked for a safe haven, but the market, continuing a recent pattern, couldn’t hold on to its gains.
The Dow Jones industrial average closed down 59.56 points at 10,724.92. On Wednesday, it gained 64 points.
The Nasdaq composite index fell 51.00 points to 3,472.10, erasing much of a 67-point gain Wednesday that broke a three-session losing streak. Nasdaq has lost ground in nine of the last 11 trading sessions.
The Standard & Poor’s 500 index rose 1.96 points to 1,436.28.
“People are worried about a slowdown in demand for the high-priced, high-growth stocks of technology companies. They’re looking for safer investments,” said Ronald Hill, investment strategist at Brown Bros. Harriman. “That’s yielded benefits for health-care and consumer nondurables stocks.”
Third-quarter corporate earnings are due out starting next week. Many investors concerned those results won’t justify stocks’ recent high prices have been taking profits since the beginning of September. In most cases, the sell-offs occurred after high-profile companies including Intel and Apple warned of disappointing earnings.
The catalyst for this latest drop was Dell, which issued its outlook after the close of trading Wednesday. The computer maker, already trading at a 52-week low before the announcement, fell $3 to close at $25.19 on Thursday.
Investors also punished Intel, which slipped $1 to $41, and IBM, which fell $1.19 to $113.19.
Hewlett-Packard tumbled $7.38 to $88.25, accounting for much of the Dow’s drop.
One analyst cautioned against reading too much into the Dow and Nasdaq declines.
“The tricky thing is to look beyond the averages because averages are so weighted by technology stocks,” said Larry Wachtel, a market analyst at Prudential Securities.
A handful of blue chips traded higher Thursday, including Procter & Gamble, up $2.88 at $73. Drug maker Pfizer rose $2 to $44.75 and Merck was up $1.75 at $75.31.
The enthusiasm for these old-economy stocks is directly related to the market’s recent volatility and fears about a more moderate economy, said Hill, the Brown Bros. Harriman strategist.
Declining issues outnumbered advancers 6 to 5 on the New York Stock Exchange. Consolidated volume came to 1.40 billion shares, slightly ahead of 1.39 billion shares in the previous session.
Bond prices edged up as oil prices fell, easing inflation concerns. The yield on the benchmark 10-year Treasury note slipped 4 basis points to 5.85%.
Among Thursday’s highlights:
* Bank stocks got a boost from investors looking for a safe haven from the battered tech sector, as well as continued merger speculation in the wake of this week’s agreements between Firstar and U.S. Bank and FleetBoston and Summit. Washington Mutual rose $2 to $41.94, Citigroup was up $1.38 to $56.13 and Bank of New York rose $1 to $55.88.
* A warning that third-quarter profits will fall short of expectations lopped almost 30% off the shares of office equipment maker Pitney Bowes. The stock fell $10.13 to $25.50. The company blamed slower sales and the strength of the dollar against other currencies.
* Coach shares rose 27% after parent Sara Lee Corp. sold 7.38 million shares in an initial public stock sale in the maker of leather goods. Coach rose $4.31 to $20.31, giving the stock a market value of $861.4 million.
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Market Roundup: C7, C8
