Technology Stocks Lead Broad Decline
Stocks had their biggest losses in a month as concern that Dell would lower prices to revive sales sent technology shares tumbling.
Shares of Dell, the world’s largest personal-computer maker, dropped after the company said it planned to announce “a major pricing initiative” today. They also were hurt by an analyst’s reduced outlook for Dell’s profit because of slowing revenue growth.
Meanwhile, rising oil prices intensified the market’s inflation jitters. A barrel of crude oil rose 79 cents, to $74.95 in New York trading.
“We’re not out of the inflation woods yet,” said Sam Stovall, chief investment strategist at Standard & Poor’s U.S. equity research.
At the close, the Dow tumbled 121.59 points to 11,013.18. Broader stock indicators also dropped sharply. The S&P; 500 index fell 13.92 points, or 1.1%, to 1,258.60, and Nasdaq fell 38.62 points, or 1.8%, to 2,090.24.
Decliners led advancers by more than 2 to 1 on the New York Stock Exchange.
Bonds were flat, with the yield on the 10-year Treasury note unchanged at 5.10%. A recent bond rally, however, showed that many investors were attracted by rising returns as well as the perception that they were less risky than stocks.
After months of intensive focus on the Federal Reserve’s interest rate policy, traders have reached a consensus that the central bank will raise rates again when it meets in August.
“We’ve been totally driven by what the Fed’s going to do, but it looks like we’ve lost that leader,” said Scott Merritt, a U.S. equity strategist at JPMorgan Asset Management. “Now it’s almost a foregone conclusion that the Fed is done after August and people are trying to find something else to focus on.”
The result, he said, is a focus on the “data du jour” -- such as oil prices or inflation data -- which can send stocks swinging wildly. Moreover, investors are highly sensitive to any signs that higher interest rates and inflation are hurting profits.
Brunswick’s forecast of lower profit for 2006 contributed to the market’s slide. The outlook for the maker of recreational boats and engines suggested rising energy costs and interest rates would hurt companies along with the economy.
“The market has got to realize that a slower economy means slower earnings growth, and that’s not factored in right now,” said Rick Campagna, who helps manage $4 billion at Provident Investment Counsel in Pasadena.
Oil prices surged after France said that the Iranian oil dispute will be referred back to the U.N. Security Council and Israeli troops and tanks entered Lebanon. Also, the Energy Department reported that oil inventories fell by a larger-thanexpected amount last week.
In other market highlights:
* Dell tumbled $1.04 to $22.38, its lowest mark since 2003, after the company scheduled a news conference to discuss its prices. Sales at Dell may be “slowing further,” a UBS analyst wrote.
Computer-related shares sank 2.2%. Apple Computer fell $2.69 to $52.96, its biggest drop since February, after Credit Suisse said the absence of new iPod digital music players may crimp sales this quarter.
Network Appliance lost $2.13 to $28.60, its biggest fall in nearly 18 months, after an analyst cited concerns over slowing sales in Europe, growing inventory and rising stock-compensation costs.
* Brunswick sank $2.28, or 7.2%, to $29.55 after it said 2006 profit, excluding some items, would fall to $2.40 to $2.55 a share from $3.13 a year earlier because of “significant” declines in demand for personal watercraft.
* Stocks of companies that cater to consumers also slumped. Electronics retailer Best Buy fell $2.92 to $47.70.
“The concern really is: Can earnings growth continue?” said Larry Peruzzi, a senior equity trader at Boston Co. in Boston. Investors are “very cautious.”
* Mortgage applications rose at a slower pace last week on higher borrowing costs, which may have affected home-improvement retailers. Home Depot lost 77 cents to $33.61 and Lowe’s declined $1.09 to $27.44.
* Genentech lost $3.08 to $80.98 after saying U.S. sales of colon-cancer treatment Avastin totaled $423 million during the second quarter, less than investors were anticipating, a Cowen & Co. analyst said.
* Genzyme, which makes enzyme-replacement therapies for rare genetic disorders, was a bright spot in the down market. The company earned 68 cents a share, excluding some items, 2 cents above analysts’ forecasts in a Thomson Financial survey. The shares rose $4.76 to $62.74.
* Gannett fell $1.29 to $55.62 after the company, the largest newspaper publisher in the country, reported an 8.3% decline in second-quarter earnings on softness at papers in Britain, as well as higher costs for newsprint and interest payments.
* Indian stocks defied expectations that they would plunge after the train bombings that rocked Mumbai, the country’s financial capital formerly known as Bombay, on Tuesday. After a slight dip at the outset Wednesday, the market rallied sharply, driving the Sensex index up 3%. Analysts said the market was buoyed by upbeat earnings from software company Infosys Technologies.
But geopolitical worries helped to drive gold to a six-week high. Near-term gold futures in New York rose $8.20 to $649.40 an ounce.