Nasdaq Slumps but Dow Ekes Out Small Gain
A pullback in shares of drug companies and major technology companies made for a losing day overall Tuesday on Wall Street, though not by much of a margin.
The Nasdaq composite slid 91.15 points, or 2.2%, to 4,143.18, dragged down by a slump in Intel.
But losers’ edge over winners on Nasdaq was a modest 11 to 9. On the New York Stock Exchange, winners and losers were nearly even as the Dow industrial index edged up 21.83 points to 11,260.61.
Trading volume was moderate as Wall Street returned from the long Labor Day holiday weekend.
Nasdaq’s loss was its first in six sessions. Through Friday, the index had surged 16% since Aug. 2.
Intel led major tech stocks lower after a well-known analyst warned that sales growth in the near-term might not meet expectations. The stock slid $4.69 to $69.25.
Major drug stocks helped drive the Standard & Poor’s 500 index down 0.9%. The stocks were hurt by one analyst’s warning about the longer-term threat of generic drugs, and by continuing debate between the U.S. presidential candidates over Medicare plans that could lower prescription prices.
The bond market was fairly placid. Treasury yields were mostly unchanged after sliding late last week on the latest signs of a slowing economy.
Brokerage Salomon Smith Barney advised clients Tuesday to boost their stock holdings, based on the decline in bond yields in recent months. Strategists John Manley and Jeffrey Warantz recommended investors hold 65% stocks, 30% bonds and 5% cash. The firm’s previous asset allocation was 60% stocks, 35% bonds and 5% cash.
Falling bond yields “point to above-average equity performance in the coming months,” the strategists wrote in a report to clients.
In currency trading, the euro fell to 89.1 U.S. cents from 90 cents on Friday, and dropped to a record low against the Japanese yen, after German Chancellor Gerhard Schroeder said he welcomed the currency’s slide--sparking concern that the views of euro-zone politicians may be at odds with the European Central Bank.
Among Tuesday’s highlights:
* Intel’s slump helped trigger selling in such major techs as IBM, down $2.44 to $131.19; Gateway, down $4.71 to $63.97; Oracle, down $1.56 to $91.06; and Sun Microsystems, down $3.56 to $125.06.
* Telecom stocks were broadly lower after the market reacted badly to WorldCom’s deal to buy Intermedia Communications. WorldCom slid $3.19 to $33.75, Vodaphone fell $2.50 to $41.81 and Nokia fell $2.38 to $44.63.
Ciena, a telecom equipment maker, fell $13.80 to $216.33. The company said it may fail to collect up to $28.2 million from a European customer, forcing it to take a charge against earnings of as much as 13 cents a share.
* In the drug sector, Merck tumbled $2.03 to $67.13, Pfizer fell $2.34 to $40.81 and Lilly dropped $2.94 to $69.75.
Banc of America Securities analyst Leonard Yaffe lowered his rating on drug stocks to “market weight” from “overweight” because of concerns about patent expirations in coming years.
Also Tuesday, Republican presidential nominee George W. Bush proposed spending $158 billion over 10 years to help senior citizens buy prescription drugs. Bush’s plan would use private insurers to provide the benefit to Medicare recipients, making it less likely to lead to drug price controls than Vice President Al Gore’s proposal. Still, the Bush plan reminded investors that the drug industry will face changes.
* On the plus side, many bank, utility and industrial stocks continued to advance. Beaten-down retail stocks also rallied.
Coca-Cola gained $2.06 to $56.31 after the company said it is on track to increase sales 5% to 6% this year and 6% to 7% next year.
Market Roundup: C8, C10
