Chips Lead Stock Retreat
Stocks fell Friday as worries about slower economic growth hit shares of industrial companies such as Caterpillar and disappointing news from chip makers pulled tech stocks lower.
Treasury bond yields rose and the dollar rallied after retail sales for July rose more than expected, reviving speculation that the Federal Reserve may resume its cycle of interest rate increases.
In light summer trading, decliners outnumbered advancers by about 2 to 1 on the New York Stock Exchange and Nasdaq.
“We’re in a seasonally slow part of the year, and there are a lot of unknowns on the horizon right now,” said Mike Malone, a trading analyst with Cowen & Co. “Based on that, there really is no urgency to get overly aggressive.”
The Dow Jones industrial average fell 36.34 points, or 0.3%, to 11,088.03.
Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 5.07 points, or 0.4%, to 1,266.74, and the Nasdaq composite index fell 14.03 points, or 0.7%, to 2,057.71.
The S&P; 500 has been trading between 1,225 and 1,280 since mid-May. The bottom of the range is supported by the underlying values of the companies, but the top is held by concerns about economic growth, Malone said.
The Russell 2,000 index of smaller companies was down 7.23 points, or 1.1%, at 679.04.
Every major market index lost ground despite cheery retail sales numbers reported by the Commerce Department. Retail sales rebounded 1.4% in July, the biggest gain in six months. June’s revised sales numbers were down 0.4%, much weaker than the 0.1% drop originally reported.
Any optimism investors feel is fragile. They had been waiting for the Federal Reserve to pause in its streak of interest rate hikes, and when it did on Tuesday, stocks fell anyway.
“There’s a sense that the market’s never happy,” said Ryan Larson, a senior equity trader at Voyageur Asset Management Inc. in Chicago. “They want one thing and when they get it, the next day we’re on to something else.”
For the week, the Dow lost 152.32 points, or 1.4%. The S&P; lost 12.62 points, or 1%, and Nasdaq dropped 27.34 points, or 1.3%.
Treasury bond yields rose on the retail sales report, with the benchmark 10-year note climbing to 4.97% from 4.93% on Thursday. The yield was 4.89% a week ago.
The dollar rounded out its biggest weekly gain in a month, as signs of rising interest rates, and thus better returns on dollar-denominated assets, boosted the currency. The euro fell to $1.273 from $1.278. Gold futures continued to slide, falling $1.40 to $633.50 an ounce.
Crude oil futures rose. A barrel of light crude settled at $74.35, up 35 cents, in trading on the New York Mercantile Exchange.
In other market highlights:
* A forecast from Analog Devices pushed semiconductor shares down 2.7%, the worst drop among 24 industry groups in the S&P; 500. Analog Devices shares tumbled $5.17, or 16%, to $26.73, the steepest decline in the index.
The company forecast fourth-quarter profit, excluding some items, of 42 cents to 43 cents a share, short of the 48-cent average estimate of analysts surveyed by Thomson Financial.
Intel, the world’s biggest chip maker, dropped 34 cents, or 1.9%, to $17.41. Shares of wireless chip developer Qualcomm dropped 1.7%, or 59 cents, to $33.31. They were the biggest weights on the Nasdaq 100.
* Apple Computer also dragged on Nasdaq after falling 42 cents to $63.65. The maker of iPod digital media players and Mac personal computers said it was delaying its disclosure of financial results as it reviews irregularities related to some past stock-options grants.
Also on the options front, Juniper Networks said after the close of regular trading Thursday that its board of directors had concluded that the company would need to restate past financial results to record additional noncash charges for option grant expenses. Juniper fell 70 cents, or 5.4%, to $12.20.
* Shares of Caterpillar, a maker of heavy equipment, fell 1.9%, or $1.29, to $67.03 and led the Dow’s decline. Among other industrial issues, U.S. Steel slumped $2.78 to $56.44.
* Shares of many mortgage lenders continued to slide on worries about the housing market. Downey Savings fell $1.58 to $62.38, Countrywide slid 81 cents to $32.94 and IndyMac was down 83 cents to $40.07.
* A gauge of home builders retreated 2.1%, led by Toll Bros., the biggest builder of luxury residences. Its shares dropped 72 cents to $24.42. KB Home was off 88 cents to $41.11 and Ryland Group sank 78 cents to $40.