Techs drain juice from Nasdaq
Technology stocks led a broad market decline Thursday after a disappointing revenue forecast from Apple.
Another plunge in oil prices failed to boost investor sentiment, which ebbed after a warning on the public debt from the Federal Reserve chief.
The tech-heavy Nasdaq composite index slumped 36.21 points, or 1.5%, to 2,443.21. It was the index’s biggest one-day drop since Nov. 27.
Blue chips held up better. The Dow Jones industrials slipped 9.22 points, or less than 0.1%, to 12,567.93. The Dow was supported by a rally in drug stocks.
The Standard & Poor’s 500 index was off 4.25 points, or 0.3%, to 1,426.37.
Losers outnumbered winners by 3 to 2 on the New York Stock Exchange and more than 2 to 1 on Nasdaq.
The Dow was higher early in the session but began to sell off after Fed Chairman Ben S. Bernanke warned of a “fiscal crisis” in coming decades should the government fail to curb spending on Social Security, Medicare and Medicaid.
“He’s stating the obvious, but when you hear it coming from him, it shakes people up,” said James Park, a trader at Rodman & Renshaw in New York.
Some investors also may have been concerned that economic data reported Thursday further dimmed the likelihood of a Fed interest rate cut.
Government reports showed a surprising plunge in weekly jobless claims to an 11-month low and a ramp-up in housing construction last month.
“People have been focusing so much on the weak housing market, but it doesn’t look like it’s spilling at all into the rest of the economy,” said Brian Gendreau, strategist at ING Investment Management. “The market has been pricing in a rate cut. It’s still in there, but with a lot less conviction than before.”
Of course, economic strength should be good for corporate earnings. So should the tumble in oil prices.
Near-term crude futures in New York closed at $50.48 a barrel, down $1.76. The price hit a 20-month low of $49.90 during trading after an Energy Department report showed that U.S. oil and fuel supplies surged last week.
In the Nasdaq market, which bore the brunt of the selling Thursday, investors seemed to be taking the view that tech stocks have rallied too far in recent months and that stock prices aren’t justified by the earnings outlook.
Apple slid $5.88, or 6.2%, to $89.07, despite reporting a 78% jump in quarterly earnings late Wednesday.
The company’s revenue forecast for the current quarter fell below some analysts’ estimates. Fiscal second-quarter sales will be as much as $4.9 billion, Apple said, shy of the $5.23-billion average forecast compiled by Bloomberg.
Tech stocks had been riding high on optimism about 2007 earnings. But recent profit reports or previews from Intel, Lam Research, Motorola and others have been less upbeat than some investors had expected.
Intel lost 39 cents to $20.65 Thursday after falling $1.26 Wednesday. Lam Research plunged $7.91 to $46.22.
But Motorola, which sank 5% last week, rose 24 cents to $18.71.
Treasury bonds rallied modestly despite stronger-than-expected economic data. Bond yields have moved up sharply in recent weeks as hopes for a rate cut have dimmed.
The 10-year T-note yield dipped to 4.74% from 4.78% on Wednesday.
“The market has been so beat up for the last couple of weeks,” said Henley Smith, a fund manager at Castleton Partners. “I’d start to buy a little at these levels.”
Among the day’s market highlights:
* Tech stocks weighing on Nasdaq included Dell, down 63 cents to $25.21; Broadcom, down $1.74 to $29.55; and Adobe Systems, down $1.63 to $38.57.
* Among Internet-related shares, Google fell $9.45 to $487.83, Yahoo dropped 93 cents to $28.12 and Digital River was off $1.06 to $50.74.
* Energy stocks were mostly lower. Exxon Mobil eased 50 cents to $71.96. Marathon Oil lost 84 cents to $85.18.
* Drug stocks attracted buyers. Merck gained 73 cents to $45.74 and Johnson & Johnson rallied 84 cents to $67.71.
* Some retailers advanced on expectations that lower fuel costs will encourage spending. J.C. Penney shot up $3.97 to $83.58 after JPMorgan upgraded it to “overweight” from “neutral.” Target added $1.15 to $61.51.
* Walt Disney rose 60 cents to $35.85, its highest since 2000, continuing an advance that has lifted the stock 4.6% year to date.
* SLM sank $2.53 to $45.47. The nation’s largest provider of college-student loans said fourth-quarter profit fell 96% because of losses on financial derivatives. So-called core earnings grew less than forecast.
* Corn rose for the sixth session in a row to a 10-year high on speculation supplies will be outstripped by surging demand for grain-based alternative fuel. Near-term futures jumped 4.25 cents to $4.12 a bushel.
