Stocks Close Mixed as Caution Grows Over Bush Plan
The broad stock market slipped Tuesday as investors pared expectations for President Bush’s $674-billion economic plan, but technology stocks gained after a better-than-expected revenue outlook from data storage provider EMC.
Bush called for cutting taxes that investors pay on dividends, as well as tax cuts for married couples and incentives for small businesses to invest in new equipment. The president offered his proposals in a speech in Chicago, but the administration already had revealed details on Monday.
Stock gauges had soared 2% or more Monday, but investors became cautious as they calculated the plan’s political chances and whether it would be effective in helping the lagging U.S. economy.
“We’ve got a very guarded market,” said Ned Riley, chief investment strategist at State Street Global Advisors. “We are all skeptics. Six hundred billion probably won’t even get through” Republicans in Congress.
Declines in oil stocks also weighed on the broad market as expectations that OPEC will raise production yanked energy prices down. The S&P; 500 oil & gas index had the biggest percentage decline in the Standard & Poor’s 500 index, dropping 5.7%.
The blue-chip Dow Jones industrial average closed down 32.98 points, or 0.4%, at 8,740.59. The Dow average had soared 5.2% in the first three trading days of the new year, making it the strongest three-session start to a year ever, according to market research firm MarketHistory.com.
The broader S&P; 500 was down 6.08 points, or 0.7%, at 922.93. The technology-laden Nasdaq composite index was up 10.25 points, or 0.7%, at 1,431.57. Nasdaq has climbed for four straight sessions.
Losers led winners by 3 to 2 on the New York Stock Exchange and by 9 to 8 on Nasdaq. Trading was active.
EMC rallied 67 cents to $7.47 after the company said fourth-quarter revenue will beat analyst expectations, citing improved corporate demand for its low-cost systems.
EMC’s forecast helped boost other data storage companies. Network Appliance tacked on 42 cents to $12.05 and Emulex climbed $1.57 to $23.50.
And computer heavyweight IBM, a Dow member, helped send techs higher after announcing several deals.
Cisco Systems rose 40 cents to $14.60 after IBM said it would sell data storage switches that the Web equipment maker has introduced.
Contract manufacturer Sanmina-SCI gained 47 cents to $5.05 after IBM said it would pay the company $3.6 billion to take over manufacturing of some lower-priced computers to cut costs.
And Solectron, another contract manufacturer, rallied 36 cents to $4.35 after IBM signed a three-year, $120-million deal with Solectron to allow it to take over a computer and equipment refurbishing center.
IBM rose $2.41 to $86.
The brighter outlook from EMC and deals with IBM helped keep some tech stocks above water, even as blue chips and the broader market fell a day after details of Bush’s economic plan became available.
“It’s a great start, a humongous start, but whether or not it helps the economy remains to be seen,” said Matthew Ruane, head of listed trading for Gerard Klauer Mattison.
Companies that sell products and services to other companies are likely to gain from Bush’s stimulus package, said Subodh Kumar, chief investment strategist at CIBC World Markets.
“As companies’ cash flow increases, they put capital investment back on the table,” Kumar said.
The dollar gained against the yen and euro as traders bet on a strengthening U.S. economy, and gold prices slipped on the stronger dollar.
Treasury yields eased. The yield on the benchmark 10-year T-note fell to 4.01% from 4.05% on Monday.
In other highlights:
* Exxon Mobil fell $1.23, or 3.4%, to $35.15, making it the biggest percentage decliner in the Dow average. The company’s decline came as crude prices slumped $1.02 to $31.08 a barrel in New York trading on signals the OPEC producer cartel is preparing to boost production to offset supplies from Venezuela that have been interrupted by a continuing strike.
* Tyco International rose 73 cents to $17.26 and ranked as the most active stock on the NYSE. The conglomerate unveiled plans to raise $4.75 billion through a new line of bank credit and the sale of securities that convert into company stock as it works to close a funding shortfall looming at the end of this year.
Market Roundup, C6-7
