Tech Stocks Fall on Profit Taking
Technology stocks resumed their slide Monday as investors, cautious while they awaited this week’s flood of earnings reports, collected profits from last week’s rally.
The market had little reaction to upbeat results from Citigroup and Bank of America and a Commerce Department report showing flattening business inventories.
Analysts said Wall Street is waiting to see whether the flood of company profit reports that begins this week provides any evidence that the weak economy is stabilizing. More than 1,200 companies are expected to report profits this week, including half of the companies in the Dow Jones industrial average and almost 40% of the Standard & Poor’s 500.
The technology-focused Nasdaq composite index closed down 55.67 points, or 2.7%, at 2,029.12. The Dow fell 66.94 points, or 0.6%, to 10,472.12, and the S&P; 500 index was down 13.23 points, or 1.1%, at 1,202.45.
“You had a decent rally last week, but the earnings worries are still there and investors are nervous,” said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
The market’s losses deepened as the session wore on despite good news from Citigroup and Bank of America, which released second-quarter results that surpassed analyst expectations. Citigroup rose 29 cents to $49.15, while Bank of America gained $1.13 to $61.38.
Despite those gains, most stocks fell on weaker earnings reports or fears of disappointment to come.
Bank of New York dropped $6.40 to $43, a 13% decline, after failing to meet expectations. Oil service stocks also struggled on worries that exploration and production demands are decreasing. Selling was especially strong in technology, particularly semiconductor stocks. Applied Materials fell $4.41 to $41.95 amid renewed worries that a recovery for the semiconductor industry may not come until mid-2002.
Tech bellwethers were weak, too, including Hewlett-Packard, which fell $1.58 to $26.40.
Analysts said investors were taking advantage of gains from last week’s big rally--which saw the Nasdaq composite rise 4%--by unloading tech stocks they feared would falter as the economy struggles to heal.
“Fundamentally, things have not changed and, as a group, technology stocks still appear to be relatively expensive,” said Matt Brown, head of equity management at Wilmington Trust.
That pessimism extended to after-hours trading when Novellus Systems reported second-quarter earnings slightly ahead of expectations, but noted significant uncertainty ahead. Investors sent shares of the semiconductor-equipment maker down $1.31 to $45.06, compounding a $3.61 loss in the regular session.
Unisys drew a similar response when it met Wall Street estimates, but warned third-quarter results will be lower than expected. The information technology company fell 55 cents to $12.60 in the extended session, adding to a 58-cent loss during the day.
Market watchers say investors are still hesitant about big commitments in an economy with such foggy prospects.
One of the indicators investors have watched closely is the level of excess inventory held by businesses. But they were little moved by a report Monday from the Commerce Department that showed businesses’ inventories of unsold goods were flat in May as sales registered the biggest increase in more than a year.
The data are a sign that businesses are finally beginning to deflate excess inventory, something economists say must happen for growth to occur again.
Declining issues led advancers 3 to 2 on both Nasdaq and the New York Stock Exchange. Trading volume was moderate.
Among Monday’s highlights:
* Bond prices rallied on expectations the Federal Reserve will try to rejuvenate the sagging U.S. economy by lowering interest rates for a seventh time this year when it meets Aug. 21. Yields on most Treasury securities--which move in the opposite direction of the price--fell to a three-week low. The yield on the benchmark 10-year note fell to 5.17% from Friday’s close of 5.22%, while the yield on the one-year bill fell to 3.50% from 3.51% Friday.
Some investors also bought Treasuries because of concern that Argentina, the world’s largest seller of emerging-market debt, won’t be able to repay $8.8 billion of bonds maturing by the end of the year.
* Oil prices tumbled 53 cents to $26.06 a barrel in New York futures trading, dragging embattled oil services stocks down with them. Among the Oil Patch losers: Halliburton, off $1.75 to $30.40; Hydril, down $5.30 to $16.70; Lone Star Technologies, off $3.98 to $25.02; and National-Oilwell, down $2.67 to $18.03.
Market Roundup, C10-C11
