Indexes Tumble; Downgrade in Tech Hits Nasdaq
A brokerage downgrade of the semiconductor equipment sector capped a troubled week on Wall Street, sending stocks sharply lower Friday ahead of the Memorial Day holiday weekend.
It was the slowest trading day on the New York Stock Exchange this year, reflecting the start of vacation for many traders as well as continuing anxiety about possible terrorist attacks. The lack of activity made prices more susceptible to big swings because low volume can exaggerate gains and losses.
The Dow Jones industrial average closed down 111.82 points, or 1.1%, at 10,104.26, after two days of moderate late-session gains.
The biggest losses came in the technology sector, sending the tech-focused Nasdaq composite index down 36.14 points, or 2.1%, to 1,661.49. The Standard & Poor’s 500 index fell 13.26 points, or 1.2%, to 1,083.82. Losers led winners by about 7 to 4 on Nasdaq and 5 to 3 on the NYSE.
It was a losing week for all three indexes, as selling erased much of the market’s gains of the previous week. The Dow dropped 2.4%, Nasdaq lost 4.6% and the S&P; 500 fell 2.1%.
“A lot of people have left early for the holiday, so it’s affecting volume,” said Stephen Massocca, president of Pacific Growth Equities. “People are also nervous there might be some terrorist attack over the holiday weekend, and that’s affecting trading.”
U.S. markets will be closed Monday in observance of Memorial Day.
Chip equipment maker Applied Materials fell $1.77, or about 7%, to $23.80 after Goldman Sachs cut its stock rating, saying it expected order rates for new equipment to slow. Rival KLA-Tencor lost $2.66 to $54.43, and the S&P; chip equipment index fell 3.1%.
“On light trading volume like we’re seeing today, a downgrade like this can drive the direction for the market,” said Brian Bruce, director of global investments for PanAgora Asset Management.
The selling spread to shares of chip makers such as Intel, which fell 73 cents to $28.66. The SOX index of semiconductor stocks slumped 3.3%.
Other tech shares also slid. Sun Microsystems fell 55 cents to $6.86 after reaffirming its quarterly financial targets but indicating that order rates are slow. Microsoft lost $1.56 to $53.26. Cisco Systems fell 33 cents to $16.57.
Also Friday, the Commerce Department said the economy, as measured by gross domestic product, grew at an annual rate of 5.6% in the first three months of 2002, slightly less than the 5.8% rate estimated a month ago. The figure still represents the strongest performance in nearly two years but provided little incentive on Wall Street to buy.
Bonds were little changed. Gold prices fell $2.10 to $320.40 an ounce in New York trading but remained near two-year highs as investors sought a safe haven for their money. Oil fell for a fourth day, slipping 27 cents to $25.88 on the New York Mercantile Exchange.
In other market news:
* Home builders benefited from a Commerce Department report showing new-home sales rose 1% last month, helped by low mortgage rates. Pulte Homes gained $2.13 to $55.48, and KB Home rose 77 cents to $52.60.
* Biogen soared $9.11, or 22.7%, to $49.47 on news that a Food and Drug Administration advisory panel has recommended approval of the biotechnology company’s psoriasis drug Amevive.
* The yen rose for a fifth week in six against the dollar as investors poured money into Japanese stocks, prompting the government to sell the currency to slow a rally that threatens export growth. Demand for yen surged this week as signs that the world’s second- biggest economy is pulling out of its worst postwar recession fueled stock market gains in Japan. The dollar fell Friday to 124.67 yen from 124.98 on Thursday.
* Vans fell $2.53, or 20%, to $10.20 after the Santa Fe Springs-based maker of athletic shoes said its fiscal fourth-quarter loss would be wider than forecast.
Market Roundup, C4-5
