Tech Shares Lead Broad Retreat; Nasdaq Falls 3.2%
A sharp drop in consumer confidence stifled investors’ enthusiasm for stocks Tuesday, sending the market sharply lower and more than wiping out Monday’s gains. Technology suffered the worst of the selling, following bearish comments from Intel’s chief executive.
Downgrades in the retailing sector also prompted investors to cash in some profits from Wall Street’s five-week winning streak.
The Dow Jones industrial average closed down 94.60 points, or 1.1%, at 8,824.41. That erased the Dow’s 46-point gain from Monday, but the widely watched market barometer is still up more than 1,100 points from its July 23 closing low of 7,702.34.
The market’s broader gauges also retreated. The tech-laden Nasdaq composite index fell 43.96 points, or 3.2%, to 1,347.78 and the Standard & Poor’s 500 index declined 13.13 points, or 1.4%, to 934.82.
Losers beat winners by 5 to 3 on the New York Stock Exchange and by more than 2 to 1 on Nasdaq. Trading volume was up from recent sessions but still modest, following the usual late-August pattern on Wall Street.
Investors were disheartened by a report from the Conference Board that its consumer confidence index fell to 93.5 from a revised 97.4 in July. Analysts had been expecting a reading of 97.0.
That bad news erased the Dow’s early 98-point gain, which came after a government report that durable goods orders surged 8.7% in July--the largest increase in nine months and far better than analysts’ expectations.
Still, analysts deemed Tuesday’s batch of economic news to be mostly positive because consumers have remained rather strong throughout the economic downturn. The durable goods orders are a greater indication that the economy is recovering, not slipping back into recession, analysts said.
“The consumer remains OK, just not as OK,” said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray. “The broader news is durable goods orders, and that at least provides some cushion relative to the double-dip [recession] worries.”
The durable goods report pushed up yields on longer-term Treasury securities as chances lessened that the Federal Reserve will cut interest rates any time soon. The yield on the benchmark 10-year Treasury note rose to 4.28% from 4.23% on Monday. The yield on the two-year T-note rose to 2.23% from 2.16% ahead of today’s $27-billion auction of the securities.
The dollar had its biggest drop in seven weeks against the yen and fell against the euro.
* Intel fell 95 cents to $17.18 following downbeat remarks by CEO Craig Barrett. Barrett said he expects modest growth in third-quarter earnings, but said capital spending in the computing sector continues to lag behind.
Other tech stocks fell, including Dell Computer, down 73 cents at $27.15. Hewlett-Packard declined 64 cents to $14.21 ahead of its earnings report, which was due after the market’s close.
* Retailers fell on a string of downgrades by Merrill Lynch & Co. AnnTaylor dropped $2.19 to $26.50, while Talbots declined $1.69 to $32.06. Sears, Roebuck lost $1.36 to $45.85. The S&P; retail index fell nearly 2%.
* Target, also lowered by Merrill, fell 79 cents to $35. The No. 3 U.S. discount chain late Monday said sales at its stores open at least a year fell below plan again last week.
* HealthSouth slumped $5.26, or 44%, to $6.71. The health-care company, the day’s biggest percentage loser and the NYSE’s most actively traded stock, said Tuesday it plans to split in two to shield its strong surgery center division from expected earnings weakness in its rehabilitation services. Morgan Stanley’s index of health-care provider stocks fell 5.3%, with all 14 members losing ground.
* Gainers included some makers of durable goods. Whirlpool rose 72 cents to $57.38, and DaimlerChrysler gained 44 cents to $44.76.
* Overseas, Japan’s Nikkei stock average finished Tuesday down 1.6%. But stocks were higher in Europe, where key indexes rose 1.8% in Germany, 2.9% in France and 1.4% in Britain.
Market Roundup, C6-7
