Quarterly Portfolio Shifts Push Down Nasdaq
Stocks ended mostly lower Thursday amid continuing end-of-quarter portfolio shifts, as Nasdaq’s technology leaders again found themselves friendless.
The Nasdaq composite index, which dived 6% Wednesday, fell 33.56 points, or 1.8%, to 1,820.57 Thursday, a new 28-month low.
Most other key indexes were marginally lower, though the Dow Jones industrials inched up 13.71 points, or 0.1%, to 9,799.06.
Losers edged winners by 16 to 15 on the New York Stock Exchange and by 3 to 2 on Nasdaq.
With the collapse of many tech issues in February and March amid a wave of earnings warnings, many institutional investors continue to jettison the stocks rather than have clients see them listed on first-quarter portfolio statements, traders said. Today is the last trading day of the quarter.
Among the former tech leaders that hit 52-week lows Thursday were EMC, down $3.58 to $29 and now down 55% this year; Sun Microsystems, off $1.15 to $14.70 and down 47% this year; and Broadcom, off $1.86 to $29.20 and down 65% this year.
Some money managers say they have no faith that any pickup in tech earnings can occur soon.
After years of soaring purchases of computers and other equipment, many companies have no need for major capital outlays, said Christopher Wolfe, a strategist at J.P. Morgan Chase & Co.’s private bank, which manages $330 billion.
“Abundant investment in technology goods is over,” he said.
But earnings warnings have hardly been limited to the tech sector. Indeed, International Paper said Thursday the weak economy, high energy prices and the strong dollar will cut earnings to 5 cents a share this quarter. Analysts had expected 15 cents.
The stock slid $1.11 to $35.11.
Bottling company Coca-Cola Enterprises said it will have a first-quarter loss and may not meet annual profit estimates because North American sales are slowing. Its shares slumped $3.02 to $18.10.
With earnings warnings and layoffs dominating business news, many analysts say there is little reason for investors to bet on a sustained stock rally--even though the Federal Reserve has cut interest rates three times this year.
“All you hear about is more layoffs and horror stories” about profits, said Bill Schneider, trader at UBS Warburg. “People need to see definitive evidence lower interest rates have kicked in” to help the economy before they’ll buy stocks.
In the bond market Thursday, long-term yields rose modestly while shorter-term yields fell.
The first quarter will be remembered as one of Wall Street’s worst. Through Thursday, the Nasdaq composite index was down 26.3% since year-end, while the Standard & Poor’s 500 was down 13.1%.
In Europe on Thursday, markets ended mixed as the European Central Bank met and left its key short-term interest rate unchanged at 4.75%. Policymakers want to see more evidence inflation is receding before lowering borrowing costs.
The euro currency slipped on the news, falling to 88.2 U.S. cents, its weakest this year. That will put more pressure on profits of U.S. companies operating in Europe.
In Tokyo, the Nikkei-225 index slid 5% to 13,072.36, taking back a chunk of its recent rebound.
Among Thursday’s highlights:
* Tech shares falling again included Agilent Technologies, off $2.70 to $30; Check Point Software, down $5.19 to $45.31; FreeMarkets, down $1.44 to $7.81; and Juniper Networks, off $4.49 to $39.40.
* Brokerage stocks headed lower. Merrill Lynch dropped $1.65 to $55.50 and Charles Schwab lost 54 cents to $15.29.
* Investors looking for relative safety turned to such sectors as insurance, HMOs and home builders. Among insurers and HMOs, St. Paul gained $1.28 to $43.23, Cigna jumped $5.05 to $105.35 and WellPoint Health rose $4.62 to $91.82. Among builders, KB Home rose 83 cents to $32.48 and Pulte jumped $2.43 to $41.36.
* There was some good earnings news from mortgage lender Countrywide Credit, which said fiscal fourth-quarter earnings rose 4%. The firm also said it expects first-quarter earnings of between 93 and 98 cents a share. Analysts had expected 89 cents. The stock jumped $1.96 to $46.84.
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Market Roundup: C6-7
