Early-Session Rally Falters
The Nasdaq composite index topped the 2,000 mark Wednesday for the first time in nearly two years but couldn’t hold it. An afternoon sell-off left the broad market modestly lower, frustrating some Wall Street bulls.
In other trading, Treasury bond yields edged up amid more good economic news. Gold held above $400 an ounce.
On Wall Street, the technology-dominated Nasdaq index rose above 2,000 by midday, peaking at 2,000.92, up nearly 21 points from Tuesday’s close. That extended its year-to-date gain to almost 50%.
Nasdaq last closed above 2,000 on Jan. 15, 2002, as the market was continuing to crumble from its record high reached nearly two years earlier.
Breaching the 2,000 mark Wednesday may have triggered some preset automated selling programs, analysts said.
“We are seeing those who have a nice profit starting to trim positions on strength as year-end nears,” Jeff Swensen, a trader at John Hancock Advisors in Boston, told Bloomberg News.
The broader market also pulled back. The Dow Jones industrial average rose as high as 9,942.01, then lost ground to close with a gain of 19.78 points, or 0.2%, at 9,873.42.
The Standard & Poor’s 500 index dropped 1.89 points, or 0.2%, to 1,064.73.
Indexes of smaller stocks, which have led the market for most of this year, suffered heavier selling. The Russell 2,000 index slid 8.41 points, or 1.5%, to 545.19.
Falling stocks outnumbered winners by 17 to 15 on the New York Stock Exchange and by about 2 to 1 on Nasdaq in active trading.
The government’s report Wednesday of higher-than-expected third-quarter productivity gains helped stoke early buying of shares, analysts said.
“Folks are really starting to believe in the sustainability of the economic recovery,” said Richard J. Nash, chief market strategist at Victory Capital Management in Cleveland.
But another report was less bullish: The Institute for Supply Management said its index of service-sector activity fell to 60.1 in November from 64.7 in October. Still, the latest reading was the eighth month above the 50 mark that signals growth.
Some analysts are betting that the market could get a further psychological lift if Nasdaq can close above 2,000 and the Dow can close above 10,000. The last time the Dow closed above 10,000 was on May 24, 2002.
In the bond market Treasury yields resumed their recent up trend. The 10-year T-note ended at 4.40%, up from 4.38% Tuesday and the highest since Nov. 12.
Many bond investors fear that a stronger economy will force the Federal Reserve to tighten credit sometime in 2004.
In commodities trading, gold stayed above $400, with near-term futures adding 20 cents to $403.90 an ounce. Gold closed above $400 on Monday for the first time since 1996.
The metal has benefited in part from the dollar’s weakness this year, because a falling dollar makes gold cheaper for foreign buyers.
Among the day’s highlights:
* General Motors helped bolster the Dow, gaining $2.26 to $45.54 after a Goldman Sachs analyst said the automaker might raise its 2004 earnings outlook because of an improving picture for its pension fund.
* Some retail shares weakened. Best Buy fell $1.10 to $57.42, Kohl’s lost $1.38 to $45.29, and Zale fell 95 cents to $54.60.
* San Diego-based Nanogen surged $1.95 to $5.74 after receiving a U.S. patent for its nanofabrication technology. The patent relates to Nanogen’s process for moving and assembling atom- or molecule-size building blocks that can be manipulated to create new materials or devices.
