Stocks Hold Up Under Pressure
A bout of profit taking and a larger-than-expected decline in consumer confidence pressured stocks Tuesday, but the market still managed to hang on to most of Monday’s big rally.
Analysts said that although investors are still wary that stocks will fall again, they were reassured by news that President Bush had signed into law legislation that toughens penalties for corporate fraud.
The Dow Jones industrial average closed down 31.85 points, or 0.4%, at 8,680.03. Over the previous four sessions, the Dow had regained 1,009 of the 2,650 points lost in more than two months of selling.
Broader stock indicators closed modestly higher. The high-tech-focused Nasdaq composite index advanced 8.94 points, or 0.7%, to 1,344.19, while the Standard & Poor’s 500 index rose 3.82 points, or 0.4%, to 902.78. It was the S&P; 500’s first close above 900 in nearly two weeks and marked the benchmark index’s first three-day winning streak since March.
Winners edged losers by about 9 to 8 on both the Nasdaq and New York Stock Exchange. Trading was active but well below the levels of last week.
The mixed finish followed a session in which stocks alternated between gains and losses--the Dow at one point was off more than 170 points--as investors tried to figure out where the market will go next.
Hopes are growing that the market hit bottom last week, but analysts hesitated to say a turnaround had begun. They noted that numerous rallies have fizzled during the last two years, and that could still happen to this one. Indeed, stocks tended to succumb to selling whenever they made a moderate advance Tuesday.
“The market is taking a pause today,” said Tom Galvin, chief investment officer at Credit Suisse First Boston. “We’re still at a very early stage of trying to define and solidify a market bottom, and it’s too early to say we’re recovering.”
A weaker-than-expected reading in the Conference Board’s consumer confidence index contributed to the selling. The figure is closely watched because consumer spending is viewed as crucial if an economic recovery is to continue. However, some analysts noted that the report measured consumer sentiment during this month’s fierce market decline, and may not reflect optimism generated by Wall Street’s recent gains.
Investors were cheered by Bush’s signing of legislation--prompted by accounting and ethics scandals at companies including Enron and WorldCom--that strengthens penalties for corporate wrongdoing. Merrill Lynch rose 25 cents to $36.50 after the brokerage denied to Congress that it knowingly helped Enron distort its financial problems.
In other trading, longer-term Treasury yields inched up, while the dollar slipped against the euro and firmed against the Japanese yen. Oil and gold both rose.
Among the day’s highlights:
* Amgen climbed $1.47 to $45.49 as biotechnology shares attracted buyers. Chiron gained $1.69 to $33.74 while MedImmune rallied $2.15 to $29.59. The Nasdaq biotech index jumped 4%.
* Power company shares rallied on relief that energy trader Dynegy’s largest shareholder, ChevronTexaco, didn’t bail out of its investment as some had feared and on Mirant’s reassurances that it is continuing to increase cash reserves. Dynegy soared 54 cents, or 45%, to $1.74. Mirant jumped $1.02, or almost 35%, to $3.96. The S&P; utilities index bounded 7.9%.
* In the tech sector, Qlogic gained $1.52 to $41.95, Juniper Networks rose 78 cents to $8.48 and AOL Time Warner rose 82 cents to $12.40. AOL and AT&T;, which added 26 cents to $10, said they postponed plans for a stock offering of Time Warner Entertainment, a joint venture that controls HBO and Warner Bros.
* Some industrial issues stumbled. Dupont fell $1.90 to $42.05, PPG Industries sank $3.26 to $56.21 and Nucor lost $3.44 to $55.
* Retailers struggled amid reports of sluggish July sales. Sears fell $1.49 to $48.26 while Gap dropped 45 cents to $12.80.
* Foreign markets were mixed. Japan’s Nikkei index rose 3.5%. In Europe, where markets rallied along with Wall Street on Monday, Germany’s DAX index advanced 0.5% and Britain’s FTSE-100 and France’s CAC-40 both lost 0.5%.
* In Brazil, the real fell 5.1% against the dollar to a record low and government bond prices slid on fears the International Monetary Fund won’t help the country avoid default on $298 billion of debt. However, Brazil’s Bovespa stock index rose 1.1%.
Market Roundup, C6-7
