Wall St. Avoids a Heavy Sell-Off
Wall Street was tripped up Wednesday by disappointing earnings reports from Intel Corp. and Yahoo Inc. and by a plunge in Asian stocks, but the U.S. market didn’t fall far.
Despite double-digit percentage declines in Intel and Yahoo shares, the technology-dominated Nasdaq composite index lost a modest 1%, off 23.05 points to 2,279.64.
The Dow Jones industrial average fell less sharply, easing 41.46 points, or 0.4%, to 10,854.86.
The lack of heavy selling may have disappointed some investors who had been hoping for a chance to buy a raft of recently red-hot U.S. tech issues at sharply lower prices.
But market bulls said the day’s action suggested that Wall Street was continuing to bet on tech as an economic driver in 2006.
Likewise, many global investors remain optimistic about Asia’s growth prospects this year, and said the pullback in most Asian stock markets in recent days was a normal “correction” after heady gains in 2005.
“This is a multiyear bull market in Asia, and everything is still in place” for that, said Anthony Cragg, manager of the Wells Fargo Asia Pacific stock fund.
“We see no changes in Japan’s strong economic fundamentals and corporate earnings trends,” said Masatoshi Kikuchi, equity strategist at brokerage Merrill Lynch & Co. in Tokyo.
Early today, most Asian markets were rebounding from Wednesday’s losses.
The sell-off in Asia had been triggered by Japanese prosecutors’ raid late Monday on the offices of Livedoor Co., an Internet firm built by 33-year-old business maverick Takafumi Horie. Authorities said they were looking at the financial dealings of the company for possible fraud.
The raid caused heavy selling of other Japanese Internet issues and of Japanese stocks in general Tuesday and Wednesday. As share volume mounted, the Tokyo Stock Exchange halted trading before the usual close Wednesday, saying its system was overloaded.
Japan’s Nikkei-225 stock index plunged 464.77 points, or 2.9%, to 15,341.18 on Wednesday. That brought its loss for the week to 6.8%. The index had hit a five-year high on Friday.
Other Asian markets also slid Wednesday. South Korea’s main index slumped 2.6% and the Thai market dropped 1.9%.
When U.S. trading opened Wednesday, the market was weighed down by concerns about Asia’s sell-off and by the fourth-quarter earnings data that Internet giant Yahoo and semiconductor leader Intel reported after the close of regular trading Tuesday.
Yahoo’s earnings before certain one-time items were 16 cents a share, up from 13 cents a year earlier. Analysts had expected 17 cents, on average. Intel’s quarterly results also fell short.
Investors hammered the stocks in after-hours trading Tuesday and in regular trading Wednesday. Yahoo ended Wednesday at $35.18, down $4.93, or 12.3%. Intel slumped $2.92, or 11.5%, to $22.60.
Google, one of last year’s market stars, dived $22.20, or 4.8%, to $444.91.
But earnings reports from some other high-profile tech companies were well received. IBM gained 80 cents to $83.80 after its results beat expectations. Teradyne, a maker of testing equipment for semiconductors, rose $1.09 to $16.99 after it also beat estimates.
In after-hours trading Wednesday, Apple Computer and EBay declined after the companies reported results, but disk-drive maker Seagate Technology soared to $26.30 on its profit report after rising 47 cents to $24.60 in regular trading.
On Nasdaq, falling stocks outnumbered winners by a modest 8 to 7 on Wednesday. Losers had a 6-to-5 edge on the New York Stock Exchange.
The Nasdaq composite index is down 2.2% since reaching nearly a five-year high Jan. 11. The blue-chip Standard & Poor’s 500, which eased 5 points, or 0.4%, to 1,277.93 on Wednesday, is down 1.3% from its 4 1/2-year high also reached Jan. 11.
Market bulls say the indexes’ small declines over the last week, despite a rocky start to earnings reporting season, show that most investors still are willing to give the economy, and stocks, the benefit of the doubt.
The tech sector, in particular, remains alluring to investors who are hunting for above-average profit growth potential, said Edward Yardeni, investment strategist at money manager Oak Associates in Akron, Ohio.
“I expect increased consumer and business spending on information technologies will be an important source of economic growth this year and over the rest of the decade,” he said.
In the same vein, some global investors say Asia offers the best outlook for a sustained economic expansion, as China continues to boom and Japan rebounds.
“The growth is in Asia and ultimately equity prices follow growth,” Wells Fargo’s Cragg said. But he said it wouldn’t be unusual for Asia’s markets to pull back further near term, after last year’s surge.
In other market highlights:
* Treasury bond yields were little changed. The 10-year T-note yield ended at 4.33%, the same as Tuesday.
* Oil futures slipped 58 cents a barrel, to $65.73 in New York, from Tuesday’s 3 1/2 -month high.
* Earl Jorgensen rocketed $2.79 to $13.22 and Reliance Steel gained $1.36 to $67.11. Jorgensen agreed late Tuesday to a $13-a-share buyout by Reliance. Both metal-products distributors are based in the Southland. Jorgensen’s rise suggests some investors expect a higher bid.
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Pulling back
How key stock indexes in Asia and the United States fared Wednesday and their declines from recent highs:
*--* Percentage decline: Country/index Wed. From high* Japan/Nikkei -2.9% -6.8% S. Korea/compos. -2.6 -4.8 India/Sensex -0.8 -4.2 Thailand/SET -1.9 -3.6 Taiwan/Taiex -3.2 -3.6 Singapore/ST -0.7 -2.7 U.S./Nasdaq -1.0 -2.2 Hong Kong/ Hang Seng -0.6 -1.9 U.S./S&P; 500 -0.4 -1.3
*--*
*Measured from peak in recent weeks.
Source: Bloomberg News
