Dow Surges as Tech-Heavy Nasdaq Slips
The Dow Jones industrials surged to their best close in three weeks Thursday as investors, once again nervous about the technology sector, added to their holdings of food, energy and other stocks perceived as lower-risk.
The Nasdaq composite index, meanwhile, slumped 2.5% after three days of gains.
The market’s caution over tech proved to be well-founded: After the close of trading, Intel became the latest big high-tech company to issue an earnings warning. The announcement pulled Intel and other tech stocks lower in extended-hours trading.
“I think people are still being more conservative, and you really have to show earnings in this market to attract new money,” said Robert Harrington, head of listed equity trading at UBS Warburg. “Technology just isn’t doing that right now.”
The Dow closed up 128.65 points, or 1.2%, at 10,858.25, its highest close since Feb. 15 and its fifth straight advance. The Standard & Poor’s 500 index added 0.2%.
But Nasdaq slid 55.19 points to 2,168.73, taking back half its gain from Monday through Wednesday.
Advancers edged decliners by 8 to 7 on the New York Stock Exchange. On Nasdaq, declining issues outnumbered advancers by 11 to 7. Trading was active on both markets.
After the markets closed, Intel said its first-quarter revenue will fall short of expectations and that it plans to cut 5,000 jobs, largely through attrition. The chip maker’s stock fell $2.31 to $30.94 in after-hours trading.
The announcement came a day after Yahoo reduced its own earnings outlook and said it was looking for a new chief executive. The tech sell-off Thursday in response to that news ended a three-day winning streak for Nasdaq.
Yahoo fell $3.25 to $17.69 on Thursday, extending Wednesday’s loss.
Analysts said the continuing string of tech sector warnings reminded investors that the weakened economy and the slumping Nasdaq market are unlikely to show a significant turnaround any time soon.
The Dow’s advance was limited by losses in IBM, which fell $1.08 to $106.47 in the regular session and 37 cents more after hours. Microsoft, another Dow stock, was down $1.44 at $59.25 in regular trading and $1.42 more in the extended session.
Manufacturing and energy-related stocks easily offset tech losses on the Dow. Exxon Mobil rose $1.64 to $85.85, while 3M, benefiting from a positive research note by Merrill Lynch, was up $4.26 at $117.19. Coca-Cola rose 97 cents to $51.40.
The market’s cautious mood might also indicate anxiety about the government’s employment report due out today.
“I wouldn’t be surprised to see a weak report, and the market is starting to anticipate that, “ said John Forelli, portfolio manager for Independence Investment Associates. “The only good news we have to look forward to is [Federal Reserve Chairman] Alan Greenspan cutting rates, and that’s still more than a week away.”
The Fed is expected to lower interest rates for the third time this year at its March 20 meeting.
Among Thursday’s market highlights:
* Yahoo’s bad news put a damper on the whole dot-com sector. Interactive Week’s Internet index fell 4.3%, led lower by such names as EBay, off $3.38 to $39.13, Amazon.com, down 56 cents to $11.69, and Commerce One, off $2.50 to $13.63.
* The S&P; retail index gained 1.6% as U.S. retailers reported that same-store sales rose 2.8% last month. Wal-Mart Stores rose 95 cents to $51.65, AnnTaylor Stores climbed $1.73 to $27.98 and Kmart was up 14 cents at $9.64.
*
Market Roundup: C7, C8
