Blue Chips, Tech Issues Plunge on Profit Worries
Investors’ continuing nervousness about corporate profits pushed blue chips and technology stocks to their lowest levels in more than a month Friday despite a government report indicating inflationary pressures are easing.
Meanwhile, the euro currency slid to a new low against the dollar.
The Dow Jones industrial average closed down 160.47 points, or 1.5%, to 10,927, its biggest drop since July 26 and lowest close since Aug. 10.
The Nasdaq composite index slid 78.63 points, or 2%, to 3,835.23, its lowest level since Aug. 11.
The decline left the Dow with a loss of 2.6% for the week and Nasdaq down 3.6% for the week.
Investors maintained their focus on corporate earnings rather than on the economy, a trend that was established early in the week.
Although the government reported Friday that consumer prices fell unexpectedly in August, the first decline in 14 years, the news did little to inspire the market, which has already factored in slowing inflation.
Many investors sought to take profits in stocks that they perceived as being vulnerable to weak earnings as the economy cools.
“The economy is seemingly slowing pretty decisively. There’s a lot of concern about whether the earnings are going to be there. So far we’ve had decent numbers, but the Street is running a bit scared,” said Charles White, president of Avatar Associates.
Friday was also a quarterly “triple witching day,” when the expiration of stock options and futures contracts generally cause a spike upward in volume and can lead to big price swings.
Volume ballooned to more than 1.2 billion shares on the New York Stock Exchange, where losers topped winners by 17 to 10.
On Nasdaq, losers swamped winners by 5 to 3.
Still, some analysts say the market is just suffering temporary indigestion.
“The month of September is going to be pretty choppy,” said John Shaughnessy, chief investment strategist at Advest. “I see things cooling off and calming down by the middle of next month because I believe earnings reports overall will be solid, oil prices should start to drift down and the Fed . . . won’t raise interest rates.”
But long-term rates continued to rise Friday, despite the inflation news. The 10-year Treasury note yield jumped to 5.84%, from 5.78% on Thursday.
Traders said some investors are dumping long-term T-bonds in favor of yielding non-Treasury debt.
“It’s a yield game, and if you can beat it by owning something else, you sell Treasuries,” said Peter Cordrey, who helps oversee $125 billion at Prudential Asset Management in Newark, N.J.
In currency trading, the euro fell to a record low as purchases of the currency by the European Central Bank failed to provide support.
The euro ended at 85.2 U.S. cents, down from 86.4 cents Thursday.
In the stock market, the exception to Friday’s downward move was the energy sector. It rallied as crude oil prices, which have soared to 10-year highs, flirted with $36 a gallon.
Halliburton rose $1.18 to $52.69, Schlumberger was up 92 cents at $84.69, and Baker Hughes traded $1.50 higher at $39.
Also, Chevron gained $2.60 to $90.19, and Phillips surged $1.63 to $66.38.
Software maker Oracle fell $6.63 to $78.31. Despite its report this week of sharply higher quarterly earnings, some investors were disappointed by sales growth in key businesses.
Investors also unloaded shares of Anadigics after the wireless communications company said its earnings for the last half of this year would be hurt by reduced orders. Anadigics slumped $5.20 to $24.67.
Among other major tech shares, Sun Microsystems lost $4.44 to $113.06 and Micron Technology sank $3.75 to $59.25.
On the Big Board, home appliance maker Maytag lost $2.19, falling to $33.63 after it warned that third- and fourth-quarter earnings would be below estimates.
But Xerox rose $1.75 to $17.75 on published reports it is being eyed for acquisition by Hewlett-Packard, Canon and others.
Carnival surged $2.88 to $22.88 after rival Premier Cruise had five of its ships seized by creditors.
Market Roundup: C4
