Downbeat Data Prompt Selling; Bond Yields Ease
The stock market gave back more ground Thursday as an early rally faded and sellers took control in the last hour, rattled by some downbeat economic data and by worries over U.S.-Iran relations.
Treasury bond yields eased to fresh two-month lows.
The Standard & Poor’s 500 index and the Dow Jones industrial average fell into the red for the month to date, surrendering more of the gains that had lifted them to 52-week highs just last week.
The S&P; slid 6.11 points, or 0.6%, to 1,003.27, leaving it down 0.5% for the month. The Dow lost 81.55 points, or 0.9%, to 9,343.96 and is down 0.8% this month.
The technology-dominated Nasdaq composite index slid 26.46 points, or 1.4%, to 1,817.24, though it still is up 0.4% since the end of August.
If key indexes lose ground in September it would mark the first monthly decline since at least February -- and would lend more weight to the argument that the year’s rally has run out of steam, at least temporarily.
“This is day four of a correction,” said Al Goldman, analyst at brokerage A.G. Edwards in St. Louis, noting that the market has fallen in four of the last five sessions.
On Wednesday major indexes suffered their biggest declines since spring as oil prices jumped and the dollar slumped.
On Thursday oil and the dollar were relatively stable, but some investors were spooked by the government’s report that durable goods orders fell 0.9% in August. That raised concerns about the economy’s recovery and whether it can be sustained.
Comments by President Bush that Iran faces “universal condemnation” if it is pursuing a nuclear weapons program also unnerved some on Wall Street, said Mark Donahoe, chief trader at U.S. Bancorp Piper Jaffray in Minneapolis. That helped trigger the selling in the final hour, he said.
By the close, falling stocks outnumbered winners by about 2 to 1, the same as on Wednesday. Trading was heavy.
Analysts say some portfolio managers are under pressure to sell because of nervousness that the year’s spectacular gains could melt away. The broad Wilshire 5,000 stock index is up nearly 17% this year; the Nasdaq index is up 36%.
A pullback of 10% or so would be considered a normal correction in a bull market. The Dow so far is down 3.3% from its 52-week closing high of 9,659.13 reached Sept. 18.
The S&P; 500 and Nasdaq composite are down 3.5% and 4.8%, respectively, from their closing peaks last week.
But Goldman said he doubted that the market would drop as much as 10%. He said many investors still were on the sidelines, and that it probably wouldn’t take much lower prices for them to jump in.
“The supply-demand ratio for equities still is quite favorable,” he said.
Wall Street continues to expect strong earnings growth from U.S. companies, which should support share prices, Goldman said.
Analysts’ consensus estimate calls for operating earnings of the S&P; 500 companies to rise 15.7% this quarter from a year earlier, according to earnings tracker Thomson First Call.
For the fourth quarter the expected gain is 21.5%.
With three business days to go in the third quarter, 443 companies have warned that they will fall short of analysts’ profit estimates this quarter, down from 466 that had issued such warnings at the same point in the second quarter, Thomson First Call said. The number of companies that have said they expect to beat expectations is 266 so far, up from 225 at this point last quarter.
Among the day’s highlights:
* Buyers continue to drive Treasury bond prices up, pushing yields lower, apparently reacting to weaker-than-expected economic data. The 10-year T-note yield slid to 4.08% from 4.13% on Wednesday and is the lowest since July 18. The yield rose as high as 4.6% on Sept. 2.
* Profit-taking in Internet-related shares, which have been among this year’s big winners, pushed ValueClick down $1.04 to $8.16, Digital River down $1.92 to $28.02 and FindWhat.com down $1.61 to $18.99.
But EBay rose 66 cents to $55.46.
* Tupperware slumped $2.53 to $13.81 after the company said it would have a loss for the year.
* Defense stocks were broadly lower, continuing a recent sell-off on worries that the industry’s earnings growth may peak by 2005. General Dynamics dropped $1.39 to $76.08, Northrop Grumman lost $1.08 to $84.92 and Engineered Support Systems tumbled $3.16 to $59.75.
* NCR, a maker of automated teller machines, bucked the market downtrend, rising $2.81 to $32.50 after Merrill Lynch raised its rating on the stock to “buy” from “neutral.”
* Walt Disney rallied 50 cents to $20.31. Goldman Sachs raised its rating to “outperform,” in part on expectations of rising home video sales in 2004.
* Shares of two initial public offerings began trading and gained modest ground. Anchor Glass Container rose to $16.80 from its IPO price of $16; online retailer Red Envelope rose to $14.55 from its IPO price of $14, though it traded as low as $13.30.
