Nasdaq Rebounds While Blue Chips Fall
dailynews.yahoo.com
By Eric Wahlgren
NEW YORK (Reuters) - The Nasdaq market rebounded into the plus column in late morning trading on Thursday while blue chip stocks remained deep in the red as Wall Street eckoned that the technology sector could better withstand interest rate hikes following news of rising inflation.
Old and new economy shares diverged after labor costs and economic growth suggested that inflation was on the rise, boosting the threat of more aggressive interest-rate increases by the Federal Reserve.
``I think there is a feeling that the Nasdaq market is not subject to the same forces as the rest of the equities world,'' said Peggy Farley, president of Ascent Meredith Asset Management.
The Nasdaq composite index (^IXIC - news) was up 17 points, or 0.49 percent, at 3,647, after dropping more than 100 points shortly after the opening.
The blue-chip Dow Jones industrial average (^DJI - news), meanwhile, slid 139 points, or 1.27 percent, to 10,806, adding to its 179 point loss from Wednesday.
Interest-rate-sensitive financial stocks were among the biggest losers with American Express Co. (NYSE:AXP - news) falling 2 5/8 to 151 1/2 and J.P. Morgan & Co. (NYSE:JPM -
news) slipping 3 2/16 to 131 7/16.
The Standard & Poor's 500 index (^SPX - news) fell 13 points, or 0.91 percent, to 1,447.
The bad news came from a Labor Department report that the first-quarter Employment Cost Index, or ECI, a broad gauge of what employers pay in wages, salaries and benefits, rose at the fastest pace in more than 10 years. The index jumped 1.4 percent, much higher than the 0.9 percent rise expected by economists polled by Reuters.
``If there is one statistic that is going to make the Federal Reserve raise interest rates by 50 basis points instead of 25 basis points, this is it,'' said Richard Babson, chairman and president of Babson-United Investment Advisors Inc. ``The market is finally waking up to the fact that there is inflation embedded in the economy.''
At the same time, the Commerce Department said U.S. Gross Domestic Product, or GDP, for the first quarter increased 5.4 percent, slightly less than the 5.9 percent boost anticipated. But the key GDP deflator, a wide gauge of price pressures in the economy, grew by a stronger-than-expected 2.7 percent.
Economists had been forecasting a 2.2 percent boost.
``Basically, these numbers are not friendly to the market,'' said Peter Cardillo, director of research, Westfalia Investments.
``The ECI is up half a percent more than the market had expected. The market is going to reflect inflationary pressures,'' he said. ``There will be talk of a half a percentage point interest rate increase at the next Fed meeting. This will overshadow any good earnings. Inflation right now is looking ugly.''
The Federal Reserve's policy-setting group meets May 16.
The Fed has taken up interest rates five times since last June but its series of modest, 25-basis point hikes have so far failed to put the brakes on the speeding economy.
The U.S. Treasury 10-year note slipped 5/32, with the yield up to 6.16 from Wednesday's close of 6.14 percent. The U.S. Treasury 30-year bond, meanwhile, was off 2/32 with the yield flat with Wednesday's close of 5.95 percent.
On the New York Stock Exchange, decliners beat advances by more than 2 to 1 with 322 million shares changing hands. There were 11 stocks hitting new highs and 31 new lows.
In general, precious metals, hotels, semiconductor and software companies moved up while retail apparel, biotechnology, railroad and financial services were down.
Among the big movers, telephone giant AT&T Corp.'s (NYSE:T - news) wireless tracking stock, AT&T Wireless Group Inc. (NYSE:AWE - news) traded at 31 7/16 after pricing at $29.50 per share on Wednesday, raking in a hefty $10.62 billion for AT&T through a deal that ranks as the largest U.S. initial public offering in history. It was the top mover on the NYSE.
AT&T was off 1 1/16 at 49 9/16.
Amazon.com Inc. (NasdaqNM:AMZN - news) was off 1 7/16 at 52 1/16 after posting a smaller first-quarter loss, as the online retailing giant nearly doubled revenues and said all its businesses were marching toward profitability.
The American Depositary Receipts of Finnish telecom giant Nokia NOKIV.HE)(NYSE:NOK - news) were the second most active stock on the NYSE, rising 2 7/8 to 54 5/8 after the cellphone maker posted better than expected first quarter profit. |
