Skittish Investors Take Fall
Stocks fell Tuesday, as twin uncertainties hung over the market--the imminent start of one of the weakest earnings-reporting seasons in a decade, and the unknown course of the American-led bombing campaign in Afghanistan.
In addition, technology shares slumped after the Supreme Court said it would not hear Microsoft’s appeal of its antitrust case. Even though the decision was expected, Microsoft fell $3.48, or 6%, to $54.56.
The Dow Jones industrial average closed down 15.50 points, or 0.2%, at 9,052.44. The broader market was also weaker. The Nasdaq composite index fell 35.76 points, or 2.2%, to 1,570.19. On Monday Nasdaq capped its first five-day winning streak since the week of June 25. The Standard & Poor’s 500 index declined 5.69 points, or 0.5%, to 1,056.75.
Declining issues outnumbered advancers by nearly 8 to 7 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading was moderate.
Analysts said it was hard to discern the biggest factor in Tuesday’s mild downturn as investors refrained from making major commitments. Investors seemed to be putting off big decisions to await news on political and economic fronts.
“It is really difficult to get a handle on this market,” said Ricky Harrington, a technical analyst for Wachovia Securities.
Harrington expects the market to trade in a range of about 200 to 300 points each for the Dow and the Nasdaq.
“But the next 200 or 300 points could be in either direction. There is no way to predict,” Harrington said, citing the political uncertainty as the biggest factor weighing on the market.
The Dow is about 600 points below its Sept. 10 close, while Nasdaq is down about 120 points. Last week, investors bid shares sharply higher after the Federal Reserve lowered interest rates for the ninth time this year and President Bush pushed Congress to approve a $60-billion economic stimulus package.
This week’s trading has been more cautious as investors know it will take a while for the economy to benefit from the lower rates and the possible tax cuts, analysts said.
Investors are also concerned that the United States will suffer more terrorist attacks as the military retaliates for last month’s assaults in New York and Washington.
“The market is just settling into the acceptance of a prolonged retaliation . . . and is preparing itself for the earnings season, which is going to be poor,” said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
Most of the major earnings results are due to be released in the next two to three weeks.
Wall Street’s trade group is estimating that because of last month’s terror attacks, the securities industry will lose $200 million in the third quarter. That forecast, in a report released Tuesday by the Securities Industry Assn., compares with third-quarter profits anticipated before Sept. 11 of some $1 billion to $1.4 billion.
Among Tuesday’s highlights:
* Semiconductor companies and those that make equipment for the industry suffered after a cautious research note by Merrill Lynch. Chip maker Intel, a Dow component, fell 79 cents to $21.45, while chip equipment maker Applied Materials tumbled $2.71 to $31.15. The Philadelphia semiconductor index fell almost 6%.
* Networking stocks traded lower after JP Morgan reduced its rating and earnings estimates on several firms and said it is premature to say the industry has bottomed. Juniper Networks slipped 39 cents to $14.85, while Cisco Systems declined 46 cents to $14.59.
* Shares of big Wall Street brokerages traded higher, despite the SIA’s gloomy earnings report. Morgan Stanley Dean Witter gained $1.50 to $49.26, Merrill Lynch rose $1.68 to $41.74, Goldman Sachs Group was up $2.63 to $77.93, and Lehman Bros. Holdings gained $2.12 to $58.50.
* Bond yields rose as investors anticipated further sales of government debt. The yield on the benchmark 10-year Treasury note climbed to 4.60% from 4.50% Friday. The bond market was closed Monday for a holiday.
* Cepheid, a Sunnyvale, Calif., company whose products help detect biological agents, soared $3.79, or 86%, to $8.19 as cases of anthrax in Florida sharpened investors’ awareness of firms developing technology that may be crucial in a chemical or biological attack.
* First Data, which provides the electronic networks used for most U.S. credit card purchases and owns the Western Union money-transfer firm, jumped $5.43 to $62.44 after the company’s earnings rose 15%.
* Gold prices fell $3.50 an ounce to $288.90 on the New York Mercantile Exchange as investor demand failed to materialize as expected following the air strikes in Afghanistan.
Market Roundup, C6-C7
