Nasdaq’s 3-Day Win Streak Comes to End
It was three and out for technology investors Friday as the Nasdaq Stock Market failed to add to its three-day winning streak.
Still, market watchers were encouraged that the Nasdaq composite index ended down a meager 14.07 points, or 0.5%, at 2,626.50--its first loss after putting together three consecutive positive days for the first time since Sept. 1.
The mild loss allowed the tech-heavy index to close up 9.1% for the week after four straight weeks of declines. And for the third time this week, tech investors shrugged off warnings of slow sales from leaders in the sector--this time, computer giants Hewlett-Packard and Gateway.
“The market is showing some resilience,” said Alan Skrainka, chief market strategist at Edward Jones. “The market could have been down a lot more, especially in the wake of the Gateway and Hewlett-Packard disappointments.”
Even more telling: Winners outnumbered losers on Nasdaq by a solid 8-5 margin on heavy volume of 2.5 billion shares.
Investors in bonds and blue-chip stocks weren’t as fortunate, however. Prices of both tumbled as the latest economic data on retail sales and inflation showed the economy was stronger than expected, reducing the betting among investors that the Federal Reserve will be in a rush to cut interest rates again.
The Dow Jones industrial average fell 84.17 points, or 0.8%, to 10,525.38, off 1.3% for the week for its third down week in a row. It was dragged lower by some “old-economy” companies, interest-rate-sensitive financials and selected tech companies such as software giant Microsoft, which lost $1.50 to $53.50.
The broader Standard & Poor’s 500 index fell 8.50 points, or 0.6%, to 1,318.32, finishing the week up 1.6%. Winners barely outnumbered losers on the New York Stock Exchange amid active trading.
Reports on retail sales and the producer price index, which measures inflation at the wholesale level, showed the economy may still be growing at a decent clip, raising expectations the Fed might not be as vigorous in lowering rates again to keep the economy from slowing down too much.
“Both were stronger than expected. That’s going to make it tough for the Fed to consider anything more than a [quarter of a percentage point] cut at the January 30-31 meetings,” said Barry Hyman, chief investment strategist at Weatherly Securities.
Earlier this month, the Fed unexpectedly cut interest rates by half a percentage point. Its policy-setting group, the Federal Open Market Committee, meets at the end of January.
The producer price index was unchanged for December versus a consensus forecast for a gain of 0.1%. But the core PPI, which excludes volatile food and energy prices, rose a higher-than-expected 0.3%.
Retail sales were less bleak in December than expected, posting a 0.1% rise. Excluding automobiles, sales were unchanged.
Evidence of economic strength wreaked havoc in the bond market, where prices plunged as yields rose sharply.
The yield on the benchmark 10-year Treasury note jumped to 5.24% from Thursday’s close of 5.11%. The yield on the one-year Treasury note climbed to 4.96% from 4.85% Thursday.
The dollar, however, surged to 17-month highs against the Japanese yen and rose slightly against the euro, as the economic data took the edge off some investors’ concerns about the U.S. economic slowdown.
The bulk of the selling in high-tech stocks was limited to the individual stocks of HP and Gateway and related companies in the software and computer industries.
Gateway fell $1.80 to $21.10 after it reported late Thursday profit that were less than one-third the expected level and also warned of lower sales ahead. HP, a Dow 30 stock, was off $1.69 at $30.69 after saying it expects earnings will fall short of expectations, blaming the economic weakness and customer demand.
Among software companies, Ariba, which makes applications used in e-commerce, plunged $8.19 to $35.19--a 19% loss--after the company said it expects sales growth to slow.
But those losses were counterbalanced by pockets of strength in telecom equipment and fiber-optics firms, including Qualcomm, which gained $1.25 to $71.81.
Another big tech gainer was online advertising firm DoubleClick, which climbed $3.50 to $14.75 after the company released better-than-expected results for the fourth quarter.
Dow losers besides Microsoft included United Technologies, which lost $3.19 to $70.69 after a recent run-up, and Procter & Gamble, off $2.44 to $70.31. P&G; is down 8% since issuing a profit warning Monday.
Some traders locked in profits ahead of the long holiday weekend. U.S. financial and commodities markets will be closed Monday in observance of Martin Luther King Jr.’s birthday.
“You had three upside days on Nasdaq and traders always get a little nervous when they have profits, particularly if you have a three-day weekend,” said Al Kugel, senior investment strategist at Stein Roe & Farnham.
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Reuters and Bloomberg News were used in compiling this report.
Market Roundup, C5-6
