Stocks Slide as Investors Take Profits
Stocks slumped Thursday amid a disappointing manufacturing sector report and worries about General Electric’s earnings outlook.
The Dow industrial average fell 114.27 points, or 1.2%, to 9,179.53, its biggest setback in a month, as profit takers got the upper hand after the market’s strong rise of the last few weeks.
The Nasdaq composite index dropped 28.50 points, or 1.7%, to 1,648.64.
The Standard & Poor’s 500 slid 15.39 points, or 1.5%, to 994.70, the first close below the 1,000 mark since Friday.
Bank, brokerage, HMO, biotech and Internet stocks all were down sharply. Falling shares outnumbered winners by 2 to 1 on the New York Stock Exchange and on Nasdaq.
Investors initially were cheered by the Conference Board’s leading indicators report for May, which showed a 1% rise. But stocks turned down after a Federal Reserve report on mid-Atlantic manufacturing activity wasn’t as strong as some analysts had hoped.
Also, a number of analysts cut 2003 earnings estimates for GE on word that the conglomerate’s plastics division saw lower orders in May. GE shares dropped 87 cents, or 2.8%, to $29.86.
Given stocks’ gains since mid-March, some experts say a pullback may be overdue.
“The market has had a nice run-up, and certainly we are at a level here that you could say is priced to perfection,” said Peter Cardillo, president of Global Partner Securities Inc.
A report from the New York Stock Exchange indicated that bearish traders recently have increased their bets on lower prices: The NYSE said the number of “shorted” shares outstanding rose 2.3% between May 15 and June 15, to 8.04 billion.
Short sellers borrow stock and sell it, betting that the price will decline. If their bet is correct, they can buy stock cheaper later to replace the lent shares and pocket the difference between the sale price and the repurchase price.
Technical trading may have contributed to losses Thursday: Today is a “triple witching” day, the quarterly expiration of stock index futures and options. The market can be riled by short-term trading strategies leading up to such expirations.
The market’s near-term focus is on the Federal Reserve, which will meet Tuesday and Wednesday. Many on Wall Street still are betting that the central bank will cut its key short-term rate, now 1.25%, by half a point to help bolster the economy.
A Washington Post report said Thursday that the Fed was “more likely” to make a half-point cut than a quarter-point cut, despite some encouraging economic data in recent days.
Treasury bond yields, which had risen early this week, declined Thursday as stocks fell. The 10-year T-note ended at 3.34%, down from 3.36% on Wednesday. The two-year T-note fell to 1.15% from 1.24%.
Beyond the Fed meeting, investors are awaiting second-quarter corporate earnings reports. To justify current stock prices, corporate managers will have to sound upbeat about the second half of the year, many analysts say.
Among Thursday’s highlights:
* Financial stocks took a hit. Citigroup lost $1.12 to $43.79, XL Capital dropped $2.92 to $83.72 and Morgan Stanley slid $2.88 to $44.01.
Lehman Bros. gave up $2.97 to $71.02 even though the brokerage said earnings in the quarter ended May 31 rose 48% from a year earlier, driven by a surge in bond trading.
* HMO shares, which have been soaring since late April, sold off. WellPoint Health sank $4.42 to $86.04, UnitedHealth lost $2.21 to $49.93 and Coventry Health slid $1.18 to $45.21.
* In the biotech sector, Amgen dropped $2.05 to $63.82, Biogen lost $2.40 to $43.25 and Myriad Genetics tumbled $1.57 to $14.65.
* Internet-related shares were mostly lower. Sohu.com dropped $4.04 to $27.14, Yahoo eased 67 cents to $31.63 and Ask Jeeves fell 80 cents to $13.43.
* On the plus side, Qualcomm jumped $1.23 to $36.92 on optimism about wireless phone sales. RF Micro Devices, a maker of cellular phone chips, rose 17 cents to $6.45. Cell phone maker Nokia was unchanged at $17.85.
* Some utility stocks attracted buyers. The Dow utility index added 0.4% to 253.94.
Market Roundup, C6-7
