Profit-Taking Caps Strong 2-Day Rally
Wall Street ended mixed Tuesday after the powerful rallies of Friday and Monday, as some investors took profits.
In other trading, crude oil prices continued to rise amid expectations that global supplies will stay limited this year.
On Wall Street the Dow Jones industrials fell 153.41 points, or 1.5%, to 10,433.41, giving back less than one-third of the 480-point surge of the previous two sessions.
The Nasdaq composite index managed a modest gain, inching up 6.97 points, or 0.4%, to 1,866.29. Nasdaq rose 4.1% Friday and 3.1% Monday.
Despite the sell-off in some blue chips, winners had a modest edge over losers overall on the New York Stock Exchange and on Nasdaq. Trading was active.
“This is just normal profit-taking after a fairly strong run in stocks,” said Bill Barker, investment consultant at RBC Dain Rauscher.
The market began to soar on Friday on news that manufacturing activity in February rebounded at a surprising pace. Buyers continued to pour into the market on Monday.
On Tuesday, a new report showed a strong recovery in the services segment of the economy last month. Nonetheless, blue-chip shares were under pressure for most of the day, though Nasdaq rallied as much as 27 points early in the session.
Still, “The mood in the market is substantially better than it was just two weeks ago, when there was a lot of gloom around,” Barker said. “People are getting their hopes back up again.”
Analysts noted that the tech-dominated Nasdaq index had lagged the advance of other market sectors in recent weeks, so tech is playing catch-up.
The Dow index is up 4.1% year to date. Nasdaq is down 4.3%.
Growing belief that the recession has ended is expected to keep a positive tone in the market in the near term, many experts say. Meanwhile, the Enron Corp. debacle is fading a bit in the headlines, reducing some of the concern about corporate accounting in general.
But the rally in stocks in recent sessions already is raising questions about stocks’ valuations relative to expected earnings per share this year. Many money managers view the market as fairly valued or overvalued, but not cheap, historically speaking.
The market showed no apparent reaction Tuesday to President Bush’s decision to impose tariffs on imported steel. Major steel stocks generally closed lower, as some investors apparently were hoping for higher tariffs than Bush ordered.
In the bond market, longer-term Treasury yields were mostly unchanged. They have been creeping higher since last week, amid stronger economic data.
In commodities trading, crude oil futures rose more than 3% after OPEC Secretary-General Ali Rodriguez said he was convinced that Russia will keep its export limits in place through June.
Rodriguez said the Russian government and oil company officials he met with in Moscow will decide on their policy by the end of March, Bloomberg News reported.
Russia was among the exporters that helped the Organization of the Petroleum Exporting Countries reduce supply and boost prices this year. OPEC kept cutting output last month, a Bloomberg survey showed, and most exporters say they will keep limits on supply at least through June.
“Russia has been the big worry,” said Chester Irvin, a crude oil broker at ABN Amro in New York. “The Mexican oil minister is going to Norway and Russia this week to discuss coordinating their policy, which adds momentum to the rally.”
Near-term oil futures in New York rose 72 cents to $23.17 a barrel, the highest since Oct. 11.
Among Tuesday’s highlights:
* Retail stocks pulled back. Many have rallied strongly in recent months as consumer spending has remained robust. Wal-Mart fell $2.22 to $60.76, Target slid $1.90 to $41.50 and Home Depot lost $2.40 to $47.50.
* Drug stocks also were weak. Abbott Labs fell $2.35 to $55.02 and Merck was off $1.20 to $61.81.
* Some heavy-industry and transportation shares fell after soaring in the previous two sessions. General Motors eased 9 cents to $58.61, Delta Air Lines sank $2.94 to $35.65 and Caterpillar fell $1.08 to $58.
Among tech leaders, many semiconductor stocks continued to advance. Broadcom gained $2.50 to $40.50 and PMC-Sierra rose $1.26 to $18.72.
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Market Roundup, C10-11
