Wall Street Fails to Build on Big Rally
Wall Street on Thursday was unable to sustain Wednesday’s momentum as stocks finished mixed--raising new fears that the 28-month-old bear market hasn’t yet run its course.
Investors endured another wild session, which has become the norm this summer. The Dow Jones industrial average, which soared 488 points Wednesday, rallied at the outset Thursday but then fell as much 246 points before recovering most of that loss to finish down 4.98 points, or 0.1%, at 8,186.31.
Technology stocks had a rougher time after a report indicated that semiconductor demand is weakening. The Nasdaq composite rebounded from its lows of the day but still ended with a loss of 50.15 points, or 3.9%, at 1,240.08, not far above the five-year closing low of 1,229 on Tuesday.
“There are some signs that stocks are in the bottoming phase, such as all the investor pessimism that’s out there,” said Robert Armknecht, manager of Galaxy Equity Growth fund in Boston. “But this market might be like a patient who had a bad fever: The fever finally broke Wednesday, but the patient may have to recuperate for quite a while.”
Historically, markets rarely bottom in July or August, Armknecht said. “Buyers just don’t seem to be around during the summer.”
The Standard & Poor’s 500 index lost 4.75 points, or 0.6%, to 838.68, though it also closed well above its lows of the session.
Some analysts expressed disappointment that the market couldn’t gain traction and build on Wednesday’s sharp rebound, which was fueled in part by Congress’ agreement on a corporate reform bill and by the arrest of executives at the heart of the Adelphia Communications accounting scandal.
The Dow’s 6.4% surge Wednesday was its biggest one-day gain since 1987.
Market breadth was positive Thursday on the New York Stock Exchange--nearly four stocks rose for every three that fell, and volume remained heavy. But many experts were hoping for a much more lopsided ratio of winners to losers to show that investors were again hungry to buy stocks, after nine weeks of sustained selling.
On Nasdaq losers had a 19-to-15 edge. Tech names were weighed down after Taiwan Semiconductor Manufacturing, the world’s largest producer of chips for other companies, said it will cut capital spending because of weakening demand.
The report drove the SOX chip-stock index down 10% to a new multi-year low. Many other tech stocks fell to their lowest levels since at least Jan. 1: Microsoft slid $3.40 to $42.83, Cisco Systems sagged $1.48 to $11.61 and Intel lost $1.22 to $17.48. Analysts at Sanford Bernstein and CS First Boston issued cautious reports on Cisco, adding to the tech malaise.
A government report showing that demand for big-ticket goods declined sharply in July also served as a reminder that the U.S. economic picture remains murky.
Still, some analysts said Thursday’s mid-session snap-back in blue-chip stocks could be seen as encouraging, considering the economic data, new bankruptcy rumors that rocked Tyco International and the steep drop in shares of AOL Time Warner, whose accounting is being investigated by regulators. Tyco fell $1.75 to $8.25 and AOL lost $1.76 to $9.64.
In other trading Thursday, the dollar weakened again, and Treasury yields resumed their decline. The yield on the benchmark 10-year T-note eased to 4.38% from 4.47% on Wednesday.
Among the day’s highlights:
* Among chip-equipment makers, Applied Materials shed $2.32 to $14.23, Micron Technology lost $2.55 to $19.20 and KLA-Tencor fell $3.88 to $38.45.
* Good news lifted some drug and biotech stocks. Abbott Laboratories gained $4.17 to $37.62 after winning regulatory approval to keep selling a thyroid drug. Amgen rose $4.85 to $41.94 after topping quarterly profit forecasts.
* Educational-toy maker Leapfrog Enterprises, backed by Michael Milken and Oracle chief Larry Ellison, went public at $13 a share and surged to close at $15.85.
Market Roundup, C5-6
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No Respite
Technology stocks took another drubbing Thursday. Among those falling to new 2002 closing lows:
Thurs. close Stock and change
Agilent Tech. $16.79, -$2.15
AOL Time Warner 9.64, -1.76
Applied Mater. 14.23, -2.32
Cisco Systems 11.61, -1.48
Cypress Semi. 11.50, -1.75
FreeMarkets 8.50, -1.87
Gateway 3.10, -0.34
Maxim Integ. 33.65, -4.51
Microsoft 42.83, -3.40
Nortel Net. 0.88, -0.24
Sun Microsys. 3.70, -0.35
Source: Times research
