Blue Chips End Little Changed; Tech Slumps
Blue chip stocks ended barely changed while technology shares sagged Wednesday after disappointing forecasts from companies such as Intel, Genesis Microchip and Pinnacle Systems.
Investors were nursing a hangover from a surprising drop Tuesday in a closely watched gauge of consumer confidence and bracing for more economic data this week as they search for clues to the economy’s health.
Bond yields pulled back from the one-year highs they hit Tuesday, somewhat soothing fears that higher borrowing costs could deflate the housing market, but the recent rapid rise in rates also may have lured some investors out of stocks.
“The consumer confidence number yesterday threw folks into a tizzy, and 10-year note yields above 4.40% are starting to provide some competition for stocks,” said Michael Vogelzang, president of Boston Advisors Inc. “You couple that with the fact that the market is up 25% from its low, and it’s going to be hard to make progress here.”
The Dow Jones industrial average slipped 4.41 points, or 0.1%, to 9,200.05, while the broader Standard & Poor’s 500 index dropped 1.79 points, or 0.2%, to 987.49. The technology-heavy Nasdaq composite index lost 10.46 points, or 0.6%, to 1,720.91.
Losers led winners by 7 to 6 on the New York Stock Exchange and by about 9 to 7 on Nasdaq in moderate trading.
During an interview Tuesday, Intel Chief Executive Craig Barrett said spending on technology will be little changed this year, suggesting that computer-related companies’ earnings may fall short of forecasts. Intel lost 41 cents to $24.49.
Pinnacle, a maker of video editing tools, late Tuesday posted earnings that missed Wall Street targets and cut its forecasts. It was the Nasdaq’s biggest percentage loser, with a decline of $4.67, or 37%, to $7.82.
Genesis Microchip, a maker of display technologies, also slumped after it forecast further declines in prices of flat panel monitors and analysts questioned whether its planned merger with rival Pixelworks would go through. Genesis shares dropped $2.75, or 20%, to $11.
A mixed bag of quarterly results, including reports from CVS and Duke Energy, also helped keep the market from straying too far in either direction.
Wednesday’s economic data, though fairly upbeat, failed to spur much demand for stocks.
The Federal Reserve Bank of Chicago said its national activity index, a monthly gauge of the U.S. economy, improved slightly in June.
Separately, the Federal Reserve said in its “beige book” report that it saw signs the economy was improving, especially in the long-suffering manufacturing sector, but that goods prices still appeared soft in much of the country and there was an unexpected jump in car inventories during June and July.
The positive economic reports boosted the dollar, which rose against the euro and the Japanese yen. Gold fell for a second day, losing $5.50 to $356.20 an ounce in New York trading.
Wall Street will work its way through a pack of economic reports this week, with data on second-quarter U.S. gross domestic product coming on Thursday, plus closely watched reports on the labor market and the manufacturing sector on Friday.
In other highlights:
* AOL Time Warner dropped 72 cents to $15.17. The Wall Street Journal said the Securities and Exchange Commission asked AOL Time Warner for documents about a program that allowed companies to buy America Online accounts for little or low cost and then sell them to their workers. The company declined to comment.
* Duke Energy said its second-quarter net income fell more than 10%, hurt by higher costs and a mild spring that hampered demand for electricity. Shares of Duke fell 86 cents to $17.36.
* CVS, the No. 2 U.S. drugstore chain, before the opening bell reported a 13% rise in quarterly profit as this year’s late Easter holiday boosted second-quarter sales and extended hours at some stores drew more customers. CVS gained $1.20 to $28.95.
