Major Indexes Slump Again
Investors, fearful of a second-half profit slump, sent technology and small-capitalization stocks sharply lower Friday, giving all three major indexes their third straight losing week. Another rise in oil prices contributed to more moderate losses in other sectors.
Long-term Treasury bond yields plummeted on a government report showing a lower-than-expected rise in consumer prices last month -- easing worries about inflation and concerns that the Federal Reserve might have to get more aggressive in raising short-term rates.
The yield on the benchmark 10-year note fell to 4.35%, from 4.48% on Thursday, its lowest since mid-April. Bond yields fall as their prices rise.
Stock investors initially were cheered by the Labor Department’s consumer price index report for June, driving stocks higher at the opening. But concerns about corporate earnings quickly took precedence, as they have all week.
“I think the bigger question now is the sustainability of the recovery and profits going forward,” said Daniel Portanova, managing director of Gartmore Separate Accounts.
The worries left major stock indexes at eight-week lows.
The Dow Jones industrial average dropped 23.38 points, or 0.2%, to 10,139.78, after rising 75 points at the outset.
The Standard & Poor’s 500 index ended the day down 5.30 points, or 0.5%, at 1,101.39.
The tech-heavy Nasdaq composite index tumbled 29.56 points, or 1.6%, to 1,883.15.
The Russell 2,000 small-stock index fell 1.2%.
For the week, the Dow slipped 0.7%, the S&P; 500 dropped 1% and Nasdaq plunged 3.3%. It was the third straight down week for Nasdaq, the fourth for the Dow and the fifth for the S&P; 500.
Recent economic reports, and some corporate earnings reports, have suggested that the economy has slowed over the last month.
Even though long-term interest rates are falling -- usually good news for the stock market -- that is being trumped by fears that corporate earnings will be much less than expected in coming quarters, analysts say.
Stubbornly high oil prices also are depressing investor sentiment. Crude hit a high of $41.80 a barrel in New York trading before easing to end at $41.25, up 48 cents from Thursday and up $1.29 for the week.
“First you have the political environment with the election, then you have the concern that profits will slow down significantly going into 2005, and finally, the geopolitical situation abroad is kind of lingering in the background,” said Chris Wolfe, global head of equities for J.P. Morgan Private Bank. “We may have good earnings, but investors are discounting these other things instead.”
Among Friday’s highlights:
* Semiconductor shares, battered in recent weeks amid worries about lackluster demand, fell further, pushing the SOX index of major chip stocks down nearly 2%. Intel sank 42 cents to $22.73. Broadcom lost $1.26 to $37.32.
* Retailers were broadly lower. Gap shed 95 cents to $22.22, Federated Department Stores, the owner of Bloomingdale’s and Macy’s stores, declined $1.04 to $44.75, and Hot Topic slid $3.50 to $15.56.
* Airlines slumped on higher oil prices. Delta Air Lines shed 43 cents to $5.50. JetBlue Airways lost 89 cents to $24.11. Southwest Airlines, whose chief executive quit Thursday, was down 18 cents to $14.57.
* An index of major oil and gas stocks rose 1% to a record high. Occidental Petroleum surged $1.34 to $50.47; Valero Energy gained $1.90 to $78.37.
* Trading was halted in Boston Scientific after it said it would expand its recall of a heart device because of a malfunction. The shares had fallen $3.09 to $37.40. The firm said it started a recall of another similar device and that the changes would hurt second-quarter profit.
* The euro rose to $1.246, its highest since March, on expectations that U.S. short-term interest rates won’t rise quickly.
