Early Rally Lifts Stocks; Dow Fades in Late Selling
Wall Street’s spring rally powered ahead early Monday, but profit takers took control after the Dow Jones industrial average struggled at the 9,000 mark.
Key indexes closed mixed, though more stocks rose than fell. Trading remained heavy.
Another jump in oil prices -- to the highest level since April 21 -- may have given some investors pause, analysts said.
The Dow rose as high as 9,003.27, then sold off in the last 90 minutes of trading. The index closed with a gain of 47.55 points, or 0.5%, at 8,897.81. It had been up 153 points after surging 248 points last week.
The Nasdaq composite index, up nearly 25 points to 1,620.79 at its peak Monday, closed with a loss of 5.16 points, or 0.3%, at 1,590.75.
The Standard & Poor’s 500 also sold off but still finished up 3.41 points, or 0.4%, at 967 -- the highest close since July 8.
The Dow has risen 18.2% since March 11 as interest rates have fallen and as investors have grown more optimistic about an economic revival in the second half of the year.
“The market is a little tired,” said Todd Clark, a trader at Wells Fargo Securities in San Francisco. That may reinforce the idea that the 9,000 mark on the Dow is a psychological hurdle, he said. Since July, the index has tried three times to move decisively through that level, only to quickly fall back each time.
Some upbeat economic data helped lift stocks early Monday: The Institute for Supply Management said its index of manufacturing activity was higher in May than in April, though still indicating the sector overall is contracting.
“The economic activity is slow to improve but the market is optimistic,” said John C. Forelli, principal at Independence Investment in Boston. “For the market, the glass is half full, as opposed to three-quarters empty as it had been for a while.”
Many analysts say the fundamentals underpinning the market rally suggest it is unlikely that profit-taking will trigger heavy losses anytime soon.
“I think any kind of correction will be short-lived and shallow,” said Kevin Marder, chief strategist at Ladenburg Thalmann Asset Management in Los Angeles.
Despite the late selling Monday, winners outnumbered losers by 21 to 12 on the New York Stock Exchange and by 17 to 16 on Nasdaq.
Some traders said the market was rattled by news that four U.S. soldiers had been briefly detained by Iran.
A jump in oil prices also may have triggered some selling. Near-term crude futures in New York rose $1.15 to $30.71 a barrel, the highest price since April 21.
Low U.S. gasoline inventories may mean that oil refiners’ demand for crude will be higher than expected in the next few months, some experts said.
On Wall Street, “oil above $30 again spooked some people,” Clark said.
In other trading, Treasury bond yields were little changed. Near-term gold futures added $1.50 to $366 an ounce in New York trading.
Overseas, European stocks rallied. The German market jumped 2.8% and the British market gained 2%.
In Argentina the Merval stock index rose 3.6% to 702.76, a five-year high, on optimism about government plans to restructure the financial sector.
Among the day’s highlights:
* Biotechnology, one of the hottest market sectors in recent weeks, continued to soar.
Genentech climbed $4.12 to $66.73 after researchers said the biotech company’s experimental drug Avastin modestly lengthened survival for colon cancer patients in clinical trials. Also, ImClone Systems surged $5 to $33.50 after the company’s cancer drug Erbitux showed effectiveness in clinical trials.
Among other biotech shares, Protein Design gained $1.33 to $15.50 and Regeneron rose $1.16 to $14.90.
But Amgen fell $1.19 to $63.55 and Genzyme lost $2.24 to $45.15.
* Home builders, another hot sector recently, pulled back after zooming in early trading.
KB Home rose as high as $63.79 but closed down 44 cents at $62.06. Hovnanian Enterprises reached $59.85, then fell back to close off 14 cents at $57.81.
* Software stocks were mixed after PeopleSoft said it would buy rival J.D. Edwards for $1.5 billion in stock. PeopleSoft slumped $1.42 to $14.97 while Edwards gained 78 cents to $12.59.
Elsewhere in the sector, SAP added 15 cents to $28.63, Oracle lost 21 cents to $12.80 and Sybase was off 26 cents at $12.39.
* Chip stocks were hit by profit taking. Intel dropped 44 cents to $20.38, Broadcom fell 48 cents to $24.03 and National Semiconductor lost $1.43 to $23.53.
The SOX chip-stock index is up 28.6% so far this year, compared with a 19.1% gain for the Nasdaq composite index and a 6.7% gain for the Dow.
* Drug stocks were weak, led by Eli Lilly, down $1.62 to $58.15, and Johnson & Johnson, off $1.13 to $53.22.
* Airline stocks lured buyers. AMR jumped 61 cents to $6.95 after brokerage Goldman Sachs raised its rating on the parent of American Airlines to “outperform” from “in-line.”
Delta surged 49 cents to $13.85, and Continental leapt $1.39 to $12.41.
Market Roundup, C8-9
