Blue Chips Fall; Tech Shares Rise
Blue-chip shares pulled back Wednesday as some investors took profits from Wall Street’s recent rally, awaiting the tide of second-quarter earnings reports.
Many technology stocks and small-company shares continued to post gains.
The Dow Jones industrial average lost 66.88 points, or 0.7%, to 9,156.21, weighed down by a slide in shares of Philip Morris parent Altria Group.
The broader Standard & Poor’s 500 index lost 5.63 points, or 0.6%, to 1,002.21.
But the tech-dominated Nasdaq composite closed slightly higher, adding 1 point, or 0.1%, to 1,747.46, a new 14-month high.
The Russell 2,000 index of smaller stocks rallied 3.02 points, or 0.6%, to 476.99, a 52-week high.
Rising stocks outnumbered losers by 18 to 14 on Nasdaq, while losers had a 17-to-15 edge on the New York Stock Exchange. Trading volume continued to increase.
“It’s an earnings game from here on out,” said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. “We’ll be in for some choppy days until we have a clear direction on what earnings might look like.”
On Wednesday, Internet portal Yahoo said second-quarter results more than doubled. But the report, issued after markets closed, triggered a slump in the shares as some investors cashed in recent gains.
Yahoo, which rose 19 cents to $35.29 in regular Nasdaq trading, fell as low as $33.13 in after-hours activity.
The risk of profit-taking is high in the wake of stocks’ sharp advance since mid-March, many analysts warn.
“The biggest question is whether technology will continue to lead and earnings will accelerate,” Kayes said. “Investors are wondering, ‘Do we jump into tech stocks now given the big advance, or sell them if earnings don’t come through?’ ”
The Nasdaq index has surged 37% since March 11 as investors have bet on a healthier economy and a strong rebound in earnings in the tech sector.
In the bond market on Wednesday, yields on Treasury securities eased after the government saw robust demand for an offering of $11 billion of 10-year Treasury inflation-protected securities, or TIPS. The notes were sold at a yield of 1.999%.
In addition to earning the stated yield, TIPS owners are guaranteed that their principal amount would increase with the rate of inflation, if any.
Analysts viewed the auction as a sign that investors still are hungry for bonds, even though a rebounding economy would be expected to push yields higher.
The yield on the conventional 10-year T-note dipped to 3.68% from 3.72% on Tuesday.
Among Wednesday’s highlights:
* Microsoft was off 23 cents to $27.47, showing little reaction to the company’s announcement Tuesday that it would abandon the practice of giving stock options to employees and that it would formally expense all stock-related compensation.
* Elsewhere in the tech sector, many chip stocks continued to rise. National Semiconductor jumped $2.64 to $23.43 after brokerage Morgan Stanley said the shares were undervalued. Among other chip issues, Micron Technology rose 40 cents to $14.40 and Intel climbed 33 cents to $23.48.
* American Software rose 35 cents to $5.15 after the company said it would begin paying a dividend at a rate of 6 cents a share per quarter.
* NCR soared $3.84 to $32.25 after the automated teller machine maker said its second-quarter earnings would beat estimates.
* Altria Group slid $2.77 to $44 on speculation that an Illinois appellate court might overturn a lower court’s decision to lower the amount of bond the company needed to appeal a $10.1-billion tobacco verdict.
* 99 Cents Only Stores fell $1.31 to $34.71. The Southland-based retailer said it would slightly miss analysts’ average earnings estimate for the second quarter because of costs of opening new stores.
* Auto parts company Dana lost 28 cents to $15.92 after soaring Tuesday following ArvinMeritor’s hostile takeover offer. The suitor’s shares fell 64 cents to $19.65.
* Japan’s Nikkei-225 index rose 0.9% to 9,990.95, its highest since August.
