Tech Shares Lead Pullback as Major Indexes Decline
Technology stocks led a sharp market slide Tuesday amid some downbeat earnings and economic reports.
In other trading, the dollar’s seesaw continued, this time to the downside, after a surprisingly optimistic German economic report.
On Wall Street, would-be buyers who have been complaining about a lack of pullbacks are getting one in the tech sector in particular.
The Nasdaq composite index, which hit a 31-month high Monday, slid 37.79 points, or 1.8%, to 2,116.04. It was the biggest percentage decline since the index fell 2.1% on Dec. 9.
The Dow Jones industrial average, also at a 31-month high in the previous session, gave up 92.59 points, or 0.9%, to 10,609.92. The Standard & Poor’s 500 index was down 11.32 points, or 1%, to 1,144.05.
The Dow had a bigger percentage drop Jan. 9, but the S&P; 500’s loss was its largest since Oct. 22.
A disappointing earnings outlook from semiconductor manufacturing equipment maker Novellus Systems gave some investors a good excuse to take profits in the tech sector, analysts said. Novellus tumbled $5.85, or 14.5%, to $34.40.
The SOX index of 18 chip-related stocks slid 4.2%. It has dropped 7.7% since reaching a 52-week high Jan. 12.
The recent losses in some of the leaders of the 2003 market advance suggest that investors may be growing wary of holding out for bigger gains.
“You’re starting to see the first signs of the rally petering out,” Alex Ingham, who manages $1.5 billion as head of U.S. equities at Aberdeen Asset Management, told Bloomberg News.
Major indexes closed Tuesday at their lows for the day, suggesting there could be pent-up selling pressure at the market’s opening today.
But other analysts say the market overall still is acting well. Tuesday’s decline wasn’t exceptionally broad: Losers outnumbered winners by about 5 to 4 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading volume was below recent peaks.
“We’re still in a good environment, we’re still in an upward trend,” said Todd Leone, a trader at SG Cowen Securities. “I like to see us go down a little bit, actually. It’s healthy. You don’t want to see the market going in a straight line up.”
The Conference Board’s report Tuesday on January consumer confidence gave some investors pause. The confidence reading was below expectations amid concerns about job growth.
That could make it more likely that the Federal Reserve would provide soothing words for markets today, some analysts said. Fed policymakers will conclude a two-day meeting and are expected to reiterate that they have no plans to raise interest rates anytime soon.
In the Treasury bond market, yields were modestly lower after rising for two days. The 10-year T-note yield eased to 4.08% from 4.13% on Monday.
The dollar, which has been seesawing for the last two weeks, fell Tuesday after a German business confidence index showed unexpected strength, luring currency traders back to the euro.
The euro rose to $1.263 from $1.247 on Monday. The dollar also fell to a three-year low of 105.62 yen from 106.31.
Demand for the yen was spurred by Japanese Finance Minister Sadakazu Tanigaki, who made comments suggesting that Japan may allow its currency to rise further before a meeting next month of the Group of Seven finance ministers.
Among Tuesday’s market highlights:
* Blue-chip stocks falling on earnings reports included Caterpillar, down $3.01 to $82; Dupont, off 50 cents to $42.58; and SBC Communications, which fell 74 cents to $25.95.
* Semiconductor stocks tumbling with Novellus included Texas Instruments, down $1.49 to $30.50; Xilinx, down $1.78 to $40.85; and Applied Materials, down 92 cents to $22.03.
But chip maker Silicon Laboratories jumped $7.57, or 17%, to $51.57 after reporting earnings well above expectations. And Agilent Technologies rose $2.19 to $36.10 after the testing-equipment maker raised sales and profit forecasts for its current quarter, citing orders from chip companies.
* Elsewhere in the tech sector, BMC Software lost $1.02 to $20.52, Veritas Software slid $1.58 to $37.11 and Scientific Atlanta was off $1.51 to $33.90.
On the plus side, Xerox gained $1.20 to $15.15 on its earnings report.
* Entertainment issues were mostly lower, including Viacom Class B shares, down $1.03 to $41.28, and Fox Entertainment, down $1.26 to $30.87.
* Real estate investment trusts attracted interest. A Bloomberg index of 155 REIT shares rose 0.8% to a record high. Gainers included Rouse, up 65 cents to $48.50; Boston Properties, up 69 cents to $49.95; Kimco Realty, up 51 cents to $46.10; and Macerich, up 86 cents to $48.55.
