Stocks End Mixed as Profit Taking Foils Early Rally
Major stock indexes surrendered an early rally Thursday to close mixed, as some investors took profits from the market’s recent run-up.
Treasury bond yields rebounded as profit taking hit that market as well.
On Wall Street, the Nasdaq composite ended down 9.76 points, or 0.5%, at 1,827.77 after rallying as high as 1,888 early in the day.
The Dow Jones industrial average gained 33.15 points, or 0.4%, to 9,587.52 after being up as much as 167 points.
“The Nasdaq has finally run out of gas,” said Robert Streed, manager of the $380-million Northern Select Equity Fund. “We had set some objective of how far various indexes, including the Nasdaq, might rally off the panic lows of September, and most have run up farther than that.”
At its high on Thursday, Nasdaq was up nearly 33% from its three-year low reached Sept. 21, which was the bottom point of the sell-off that followed the terrorist attacks.
The Dow index is up 16% since Sept. 21.
With each advance the market has priced in more of any corporate earnings recovery that could occur in 2002, analysts say. At some point, investors may become less willing to buy stocks if they believe prices fully reflect 2002 earnings, and perhaps even 2003 earnings.
“Even though it’s quite likely the economy will bottom in the first quarter of next year and begin to recover in the second quarter, a recovery in earnings is going to take longer,” said Stanley Nabi, who manages about $1 billion at Credit Suisse Asset Management. “There are a lot of stumbling blocks in front of us in terms of earnings.”
Despite the reversal in major market indexes Thursday afternoon, however, rising stocks slightly outnumbered losers on the New York Stock Exchange and on Nasdaq.
In the bond market, Treasury yields rose after hitting 40-year lows on Wednesday. Analysts said some investors are nervous that bond yields may have trouble falling further, if investors increasingly believe an economic recovery is likely in the first half of 2002.
Sharp cuts in short-term rates Thursday by the European Central Bank and the Bank of England boosted expectations that the global economy will turn around in 2002, traders said.
The 10-year Treasury note yield, a benchmark for mortgage rates, rose to 4.28% from 4.18% on Wednesday. The two-year T-note ended at 2.40%, up from 2.29%.
Imoneynet.com, which tracks money-market mutual-fund yields, said the average seven-day yield on taxable money funds fell to a record low 2.16% this week from 2.23% a week ago.
Among Thursday’s highlights:
* Major tech stocks were mixed. Cisco Systems added 16 cents to $19.09, and Sun Microsystems gained 68 cents to $13.27. But Apple Computer lost 88 cents to $18.71, and Applied Materials fell 94 cents to $38.40. Advanced Micro Devices led semiconductor stocks lower, falling $1.12 to $12.40, after repeating its forecast that fourth-quarter sales will be unchanged or rise at a percentage in the high single digits.
* AOL Time Warner gained $1.95 to $36.45, extending this week’s advance, amid expectations its Warner Bros. release “Harry Potter and the Sorcerer’s Stone” will be a box office smash.
* Some health-care stocks had a bad day. Biotech giant Amgen fell $2.36 to $57.58, leading that sector lower.
Becton Dickinson tumbled $3.93 to $32.77. The leading maker of syringes didn’t raise its profit forecast for 2002 when it reported fiscal fourth-quarter results.
Drug firm Sepracor slid $4.96 to $47.10 after saying it will issue $400 million of convertible subordinated notes, which could dilute the value of outstanding shares.
* Gold mining stocks fell as near-term gold futures dropped $4.20 to $276.80 an ounce in New York.
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Market Roundup: C6-C8
