Holiday Sales Don’t Cheer Investors
An early rally on Wall Street faded Monday after a report showed U.S. manufacturing shrank for a third straight month in November.
Stocks had shot higher after the opening bell, with the Dow industrials gaining almost 150 points on evidence of strong holiday sales at retailers such as Wal-Mart Stores and an investment upgrade on chip maker Intel.
But the upswing hit a bump when a manufacturing report from the Institute for Supply Management was weaker than economists had forecast and signaled output was still contracting.
“A lot of people thought the economy had turned the corner and this brings us back to reality,” said John Cassady, senior portfolio manager at Fifth/Third Investment Advisors.
“Manufacturing is mired in this no-growth area and I think that’s going to be the case for a while,” he said.
The Dow Jones industrial average closed down 33.52 points, or 0.4%, at 8,862.57. The broader Standard & Poor’s 500 index fell 1.78 points, or 0.2%, to 934.53. The technology-laden Nasdaq composite index gained 6 points, or 0.4%, at 1,484.78.
Winners led losers by about 5 to 4 on the New York Stock Exchange. They were about even on Nasdaq. Trading was active.
Intel gained 17 cents to $21.05 and Advanced Micro Devices rose 43 cents to $8.93 after Lehman Bros. upgraded both companies, citing growing demand for computers that use their microchips.
“There’s some belief in the market that we’re slowly wending our way to improved demand,” said Marian Kessler, fund manager for Rutherford Investment Management in Portland, Ore. “Tech is the flavor of the day.”
Manufacturing stocks also weighed on the Dow average after the disappointing ISM figures.
Heavy equipment maker Caterpillar shed 68 cents to $49.22, while conglomerate 3M sagged $1.50 to $128.35.
The ISM said its index of manufacturing business conditions read 49.2 in November, below forecasts for 51.3. A reading below 50 indicates the sector is contracting.
Losses in the Dow were kept in check by Wal-Mart, which rose 22 cents to $54.38 after the world’s biggest retailer on Saturday posted record one-day sales for the day after Thanksgiving, and an independent poll by ShopperTrak found sales at all retailers are up more than 12% over last year.
Bond yields, which have been climbing in recent weeks, soared early in the day on the retail-sales reports, but fell back after the ISM report.
The yield on the benchmark 10-year Treasury note, which closed Friday at 4.21%, jumped to 4.35% before retreating to 4.23% at the close.
In other highlights:
* Wireless stocks helped underpin the technology sector after Morgan Stanley upgraded the U.S. wireless telecom industry, saying it expected 2003 to be a much better year. AT&T; Wireless Services rallied 50 cents to $8.05. Sprint PCS Group tacked on 43 cents to $6.19.
* Nortel Networks was the most active stock on the NYSE after the company said it will supply $65 million in gear to expand the wireless phone networks operated by China’s No. 2 carrier, China Unicom. Nortel shares jumped 36 cents, or 19%, to $2.30.
* Nextel Partners added $1.45 to $8.05 after saying Microsoft Chairman Bill Gates increased his stake in the wireless telephone company to more than 5%. Microsoft shares edged up 1 cent to $57.69.
* Johnson & Johnson sagged $1.32 to $55.70 amid worries French regulators may ban the use of the firm’s anemia drug for people with chronic kidney failure because of worrisome side effects seen in some patients.
* Schering-Plough dropped $1.16 to $21.50. The drug maker may face competition for treating hepatitis C as Roche Holding is expected to win U.S. regulatory approval to market its therapy for the disease. Analysts said Roche may sell its treatment at a discount to capture half of the $2-billion market.
Market Roundup, C8-9
