Tech Sector Drags Stocks Lower
Technology shares led the stock market lower Monday as investors cashed in recent gains after the market approached its 2003 highs last week amid signs of a strengthening U.S. economy.
Computer maker Hewlett-Packard dragged down the Dow industrials after a brokerage firm forecast a dip in sales of some HP products in the new year. And semiconductor giant Intel retreated despite an upgrade by J.P. Morgan.
The Dow Jones industrial average fell 53.26 points, or 0.5%, to 9,756.53; the Standard & Poor’s 500 index dropped 6.10 points, or 0.6%, to 1,047.11; and the technology-laced Nasdaq composite index sagged 29.10 points, or 1.5%, to 1,941.64.
Losers topped winners by about 2 to 1 on both the New York Stock Exchange and Nasdaq. Volume was moderate.
Given the market’s heady climb so far this year, some investors are betting the economy’s recent show of strength is already largely factored into stock prices.
“We’re in a waiting game for the next round of good news,” said Jeffrey Kleintop, investment strategist at PNC Advisors. “We got good news through the earnings season and good news from the employment report, but it’s going to take some time for these data points to all come together and paint a picture of a sustainable recovery.”
Blue-chip stocks hit a 17-month high and Nasdaq hit a 22-month high early in Friday’s session after a report showed U.S. businesses created nearly twice as many jobs as expected in October. But key indexes ended the session down as concerns over recent lofty gains in share prices damped enthusiasm.
The data also fanned speculation that the Federal Reserve would raise interest rates sooner than anticipated to clamp down on any signs of inflation.
“The economy seems to be picking up steam, and now there are concerns about higher interest rates, higher inflation,” said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Banking.
Higher interest rates would cut corporate profits as the cost of borrowing rises.
Technology stocks were in the spotlight Monday, as HP fell 99 cents to $22.01 after a Lehman Bros. analyst cut his forecasts for the company’s first-quarter revenue due to seasonal fluctuations on sales of printers and computers for large corporations.
Semiconductor stocks fell after Ulrich Schumacher, chief executive of Germany’s Infineon Technologies, said, “We should not become too enthusiastic,” even as demand for chips used in personal computers rebounds after a two-year slump. Infineon is Europe’s second-biggest supplier of semiconductors and its U.S.-traded shares lost $1.15 to $14.55.
Intel, the world’s biggest chip maker, fell 48 cents to $33.39. Applied Micro Circuits declined 42 cents, or 6.1%, to $6.46, for the biggest percentage drop in the S&P; 500.
All 18 members of the SOX index of chip stocks fell, helping push the benchmark down 3%.
IBM provided a bright spot. It gained $1.69 to $89.95 and ranked among the Dow’s biggest percentage gainers after a weekend report in Barron’s pegged the computer giant as one of the beneficiaries of next year’s expected recovery in corporate technology spending.
Bond yields gained for a fourth straight session -- the longest such stretch in three months -- as traders continued to react to the evidence of economic growth and the government began selling $57 billion in new debt.
The Treasury sold $24 billion in three-year notes at a yield of 2.63%.
The yield on the benchmark 10-year T-note inched up to 4.45% from 4.44% Friday. The bond market is closed today in observance of Veterans Day; U.S. stock markets are open.
In other highlights:
* Steel stocks fell after the World Trade Organization said U.S. steel tariffs violate global trading rules. U.S. Steel lost 92 cents to $23.48, Nucor fell $1.18 to $53.10, Reliance Steel & Aluminum slid 35 cents to $28.95. Bloomberg’s index of steel stocks slipped almost 2%.
* Kohl’s declined for an eighth straight session, sliding $1.26 to $50.65. The retailer’s prospects for longer-term earnings growth have “become less certain,” Goldman, Sachs & Co. analyst George Strachan said. He cut his rating on the shares to “in-line” from “outperform.”
* Amazon.com declined $2.33 to $51.98. Jeffrey Bezos, the Internet retailer’s founder and chief executive, sold $22.4 million of his shares last week, Securities and Exchange Commission filings show.
* Circuit City Stores jumped $1 to $11.63 after Jefferies & Co. raised its rating on the stock, saying business at the No. 2 consumer electronics retailer could be poised for a turnaround.
Market Roundup, C10-11
