Stocks Fall, but Hopes for Real Rebound Rise
The stock market ran into profit-taking Friday after a spectacular two-week rally, but the damage was limited, boosting hopes that a sustainable rebound is underway.
Meanwhile, a fresh surge of buying pushed short-term Treasury yields sharply lower. Some analysts said demand for Treasuries may have reflected safe-haven buying amid turmoil in Latin American markets.
On Wall Street the Nasdaq composite index eased 18.73 points, or 0.9%, to 2,163.41, but that still left it up 10.3% for the week, after the previous week’s 14% surge.
The Dow Jones industrials closed down 113.86 points, or 1.1%, at 10,579.85 on Friday and for the week were up 4.5%.
Losers topped winners by 20 to 18 on Nasdaq on Friday and by 19 to 12 on the New York Stock Exchange. Volume remained active.
Some analysts said stocks could see more profit-taking next week. Still, “investors should be thrilled if the market retreats and gives up only half of the gains we saw in the last few days,” said John Forelli, portfolio manager at Independence Investment Associates.
“If we then start inching up from there, that would be a definite victory for the market,” he said.
Major tech shares, which enjoyed some of the biggest run-ups of the last two weeks, were off modestly at worst Friday.
Hewlett-Packard dropped 80 cents to $31.70, Apple Computer lost 68 cents to $25.04, Qualcomm slid $2.50 to $63.83, and Intel eased 6 cents to $32.43.
But IBM rose 36 cents to $114.83, Cisco Systems added 24 cents to $19.15, Broadcom jumped $2.61 to $40.62, and Veritas Software gained $3.11 to $67.36.
The broad market began its recovery two weeks ago. It was already rallying briskly when the Federal Reserve on Wednesday unexpectedly cut its key short-term interest rate for a fourth time this year. The Fed’s rate now is at 4.5%, the lowest since 1994.
Also contributing to optimism this week were a slew of first-quarter corporate earnings reports that were better than expected--though expectations, analysts note, were low to begin with.
Of the 235 companies in the Standard & Poor’s 500 index that reported earnings for the quarter as of Friday morning, 57% surpassed expectations and 30% met estimates, according to First Call/Thomson Financial.
“Investors are leaping out on the faith that the economy is going to correct itself and you’re going to have a better 2002 even though the near-term earnings and other fundamentals are terrible,” said Jon Brorson, director of equities at Northern Trust. “People are afraid they’ll miss out if they don’t buy now.”
Still, earnings reports haven’t uniformly thrilled investors. Drug giant Merck fell $4.66 to $73.61 on Friday after the firm reported higher results but warned of slowing growth.
Profit-taking also hit bank, brokerage and utility shares.
In the bond market, the yield on the three-month T-bill slid to 3.77% from 3.85% on Thursday and now is at a two-year low. Some traders said Latin American market woes were boosting demand for Treasuries, while others said falling yields reflect belief that the Fed will cut interest rates further in the months ahead.
But longer-term T-bond yields eased only slightly.
Market Roundup: C4
