Wall Street Shows Signs That Rally May Be Fizzling
Stocks fell Friday after the previous day’s cautious outlook from Microsoft added fuel to investors’ concerns that the market’s heady advance this year had gone too far.
The technology-laden Nasdaq, which has seen the biggest gains, suffered its second down week in a row, while the Dow industrials and the Standard & Poor’s 500 snapped a three-week winning streak.
“It’s starting to become more rational,” said Robert Mikkelsen, managing director of institutional sales and trading at Advest Group. “The earnings are better than expected in general, and the expectations going forward are still good. But I think maybe the market in the short run got a little bit ahead of itself.”
Friday marked the end of the busiest week of the third-quarter earnings season. Most companies so far have reported earnings in line with or better than expectations, but not strong enough to sustain the run-up in stock prices since the rally began in March.
On Friday, the Dow Jones industrial average fell 30.67 points, or 0.3%, to 9,582.46. The Nasdaq composite index skidded 19.92 points, or 1.1%, to 1,865.59 and the S&P; 500 shed 4.86 points, or 0.5%, to 1,028.91.
Losers led winners by about 9 to 7 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Volume was heavy for the third straight day.
For the week, the Nasdaq index dropped 2.5%, the Dow lost 1.4% and the S&P; 500 fell 1%.
“A lot of investors were expecting very solid numbers. They were extrapolating estimates and raising the bar too high for the fourth quarter,” said Keith Keenan, vice president of institutional trading at brokerage Wall Street Access.
Friday could’ve been worse. Early on, the Dow was down 115 points and Nasdaq 44 points before the market rebounded.
Microsoft led the Dow lower, tumbling $2.30, or about 8%, to $26.61. The drop was Microsoft’s biggest one-day percentage loss since Sept. 17, 2001, the day the markets reopened after the Sept. 11 attacks.
The company posted a rise in quarterly profit after the market closed Thursday and increased its outlook for the current fiscal year, but within the expected range.
Shares of Wal-Mart Stores also weighed on the Dow, a day after about 250 workers at its stores across the country were arrested on immigration charges in an investigation into contractor cleaning crews. Wal-Mart fell 59 cents to $58.11.
Bond prices rose and yields fell for the fifth session in the last six as investors moved assets into fixed income. The yield on the benchmark 10-year Treasury note slid to 4.23%, down from 4.32% on Thursday.
Helping to stabilize Wall Street was the fact that share prices rose slightly in Tokyo on Friday after plunging more than 5% the day before.
In other highlights:
* Baby wear maker Carter’s jumped 27% in its first day of trading. The shares closed at $24.05, up from the offer price of $19, giving the company a market value of $673 million.
* Scientific-Atlanta, a maker of equipment for cable TV companies, plummeted $6.35, or 18%, to $28.68. The company said first-quarter profit rose, but reported disappointing shipments of its most advanced set-top boxes to cable operators.
* Gateway dropped $1.48, or 24.3%, to $4.62. Gateway posted its 11th quarterly loss in three years as it lost money in its core personal computer business and struggled to reinvent itself as a consumer electronics store that sells a broad range of products.
