Stocks Sink, but on Weak Volume
Wall Street took a sharp turn south Monday on what one analyst called a “reality check” for a market that has been ebullient in the face of a sputtering economy, dismal corporate earnings and a geopolitical situation fraught with uncertainty.
But weak volume indicated there was no big rush for the exits, traders said.
Meanwhile, yields continued to slide in the Treasury bond market.
In the stock market, the Dow Jones industrial average sank 275.67 points, or 2.9%, to 9,269.50, and the Standard & Poor’s 500-stock index fell 26.31 points, or 2.5%, to 1,078.30. For both blue-chip indexes, it was the biggest percentage drop since Sept. 20.
The Nasdaq composite index lost 69.44 points, or 3.9%, to 1,699.52. Before Monday, Nasdaq had rebounded 24% after hitting nearly a three-year low in the first week of trading after the terrorist attacks.
Losers topped winners by 2 to 1 on the New York Stock Exchange and on Nasdaq.
Monday’s market action was more understandable to some Wall Street pros than the six-week rally that preceded it.
“We came very far off the September lows without a lot of new information, and maybe this is the first reality check,” said James D. Awad, chairman of money manager Awad & Associates in New York.
Analysts said investors seemed to turn more nervous about how long the war in Afghanistan will last and whether--and how well--the U.S. economy can rebound.
Until Monday’s bout of soul-searching, Wall Street apparently was willing to “look over the valley” toward an anticipated recovery next year, Awad said.
But others dismissed Monday’s sell-off as a blip.
Subodh Kumar, chief investment strategist at CIBC Oppenheimer in Toronto, said the market was overdue for a bit of profit-taking after the sharp run-up of the last month and a half.
He acknowledged the rally had been based mainly on faith that the economy will respond positively to the Federal Reserve’s campaign of interest rate cuts and the Bush administration’s massive planned economic stimulus package.
“But that’s how it always is with economic recoveries,” Kumar said. “They come when there seems to be no obvious reason.”
In the bond market, investors continued to buy Treasuries across the board, pushing yields on some issues to record lows.
Six-month T-bills sold at auction Monday hit a record low yield of 2.05%. The five-year T-note yield dropped to a 38-year low of 3.67% from 3.74% on Friday.
The Fed meets next week and is widely expected to cut its key short-term interest rate, now 2.5%, for the 10th time this year.
Among Monday’s highlights:
* The Dow was slammed by Boeing’s sharp decline. The jet maker’s shares slid $3.93, or 10%, to $33.75 after the company lost its bid to design a new U.S. jet fighter.
The contract’s winner, Lockheed Martin, eased 92 cents to $49 after trading as high as $52.98.
* Bank stocks fell after rallying in recent weeks. Citigroup slid $2.18 to $46.40, and Bank of America lost $1.15 to $59.50.
* Home builders also were weak. KB Home fell $1.42 to $28.93. Ryland slid $1.90 to $51.58.
* Computer chip makers gave back a chunk of their recent rally. Broadcom fell $2.57 to $34.48, Texas Instruments lost $2.32 to $28.50, and National Semiconductor was off $2.46 to $26.01.
* Among Southland issues, Gemstar-TV Guide slid $3.05 to $20.14. Had News Corp. won the bidding for GM Hughes, parent of satellite TV firm DirecTV, Gemstar’s electronic TV-listings guide was expected to be used by DirecTV.
News Corp. withdrew from the bidding, allowing EchoStar Communications to strike a deal for GM Hughes.
* Most major foreign stock markets had a down day. The German market fell 3.3%. The Hong Kong market lost 2.2%.
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Market Roundup, C12-13
